Electricity distribution networks could see revenue cuts for under-performance on connections
Ofgem yesterday informed Britain’s electricity distribution network operators (DNOs) that their revenue could be cut following a review of how well they are dealing with new customers that request connections. Based on provisional information provided to Ofgem the cut in revenue could be up to £13.9 million across all six DNO groups.*
Managing connection requests is an essential part of DNOs’ customer service, especially as the energy system is rapidly becoming smarter and more flexible. New businesses, generators and housing developers are among those that depend on an efficient connections service.
As part of their 2015-2023 price controls Ofgem set DNOs an incentive to engage effectively with larger customers requiring new connections. Failure to meet minimum expectations can lead to a financial penalty. Following feedback from customers to our consultation in July, our view is that all DNOs may have fallen short of these expectations.
Many of the failings involve poor communication. For example, some customers struggled to get progress updates on their connection requests or found that information they were provided by a DNO was not detailed enough. In other cases the DNO failed to explain the cost of reinforcing its network when making quotations for connections work.
In general DNOs seem to be improving their engagement and services but some specific issues raised by stakeholders remain unaddressed. As a result, each of the DNOs faces a reduction in its revenue.
Ofgem is consulting on its view, giving stakeholders and the DNOs a further opportunity to provide evidence on performance. A final decision on each DNO’s performance and whether they will face revenue penalties will be made by the end of November.
See Ofgem’s latest consultation: Consultation on penalties for the distribution network operators under the Incentive on Connections Engagement.
Notes to editors
- *There are 14 electricity distribution networks onwed by six groups as set out in our Map: who operates the electricity distribution network?
- As well as setting the incentive mentioned above, Ofgem also requires DNOs to meet a code of practice that supports the development of a competitive market in connections services.
For further information, contact:
Tim Webb: 0207 901 7179
Media out of hours mobile: 07766 511470
Ofgem is the independent energy regulator for Great Britain. Its priority is to make a positive difference for consumers by promoting competition in the energy markets and regulating networks.
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