Summary and implications
The starting point to supply of electricity to a new development is section 16 of the Electricity Act 1989 (the EA). This imposes upon the electricity distributor a duty to make a connection between the electricity distribution system and a new development. The recent case of William Old International Limited v Arya & Anor (2009) (the William Old case), together with other recent changes, has highlighted a number of potential traps for developers. This article looks at the key issues for developers when planning electricity infrastructure works. It considers:
- duties imposed on electricity supply companies;
- how to reserve power for future phases of a development; and
- pitfalls to avoid.
Developers are well advised to heed the words of Baden-Powell and "be prepared". Many developers are only now dusting off their development appraisals and giving consideration to the key requirements of any successful development. Of course the provision of utilities, and in particular electricity, is a key requirement.
The relevant Statutory Undertaker is under a duty to connect on request – an obligation imposed by section 16 EA (see the table to the right). Following an application to the electricity company a complex (but regulated) series of steps need to be followed to determine the basis upon which electricity can be supplied, or not if an exception applies.
The connection work involved in providing a new electricity connection can be split into two categories. The first category is non-contestable work. These works can only be undertaken by the network host (i.e. the electricity supplier). The second category is contestable work. These works may be undertaken by a network host or by an accredited Independent Connections Provider (ICP). An ICP is a company that has been approved and included on the Lloyds Register of Contractors under the National Electricity Registration Scheme (NERS). Following the privatisation of the electricity industry the industry regulator, OFGEM, sought that all new connection work should become contestable. The expanded list of accredited contractors has certainly helped competition for this type of work.
Section 18 EA also allows a developer to enter into an electricity reservation agreement with electricity suppliers. The benefits are self-apparent. On payment of an annual reservation fee, a developer has certainty that a supply will continually be made available and enables a developer to meet their obligations during the course of the development. The annual fee payable (which in itself is subject to regulation) can be regarded as insurance against the risk of having to seek an alternative supply in the event of lack of capacity. Needless to say, an alternative supply can be prohibitively expensive (for example, at "London" current rates, allow £500 per metre to lay a single circuit 5 MVA supply).
Point of connection
Whilst certain elements of electricity connection are subject to competitive quotations, other elements remain with the network provider, for example determining the point of the electricity connection to the network (known as POC). The risk for a developer is where the POC requires a supply to the development site from a point which is not adjacent to the site and may impose a need to cross third party land.
This was an issue raised in the recent William Old case. In order to connect a site to an electricity network, cabling was required over adjoining land. Arrangements were necessary in order to put in place and carry out the work, and to ensure that the future use of that cabling was properly regulated.
Reservation of rights
It is commonplace to ensure that in disposing of land, rights are reserved over retained land. These rights (usually easements) typically allow the developer to connect to existing cabling or install new cabling. In instances where land has not previously been owned by the developer, similar arrangements can be achieved through adjoining owner agreements. In the William Old case there was a requirement to enter into a wayleave agreement with the network provider. It was held that a reservation of an easement did not compel the landowner to enter into a wayleave agreement with the electricity supplier. The electricity supplier has power to apply to the Secretary of State under schedule 4 of the EA for the appropriate wayleave, but the preference is to deal with the issue through a specific deed of grant. As the supplier had imposed the requirement for a wayleave prior to the new electricity supply being energised, an impasse was reached. Lessons learned for developers
- In future, careful consideration of the utility infrastructure must be given on a site breakup. A simple reservation of easements may be inadequate. Instead, it should be coupled together with a positive obligation on an adjoining landowner to enter into easement and wayleave documentation. In order to ensure this "positive" obligation binds successors in title more elaborate drafting may be necessary.
- On acquisition of a development site the POC must be identified and the extent of the right to connect to this evaluated.
Consider retaining ownership of a services strip between the POC and the development site. This has the advantage of effectively ring-fencing a site from a utilities point of view and avoiding the need for a third party wayleave.
Click here for -'Section 16A - Duty to connect on request:'