Ofgem has recently announced that certain elements of reinforcement and diversionary works associated with Distribution Network Operator (DNO)-provided connection services should be contestable. This follows the conclusion of its industry-wide consultation on "Proposals for extending the scope of contestable works in relation to competition in electricity connections", the purpose of which was to consider proposals to develop further competition in the provision of electricity distribution connections.

A DNO has a duty to provide and install assets necessary for the connection of premises to its network. Under current arrangements, certain connection activities are open to competition such that either the DNO or approved contractors may carry out the work for the customer. These activities include: design; procurement and provision of materials; installation and testing; and live working in certain circumstances (eg. brownfield sites which have been cleared on pre-existing distribution infrastructure). These so-called "contestable works" will be adopted by the DNO as part of its network on completion of the works by the so-called "Independent Connections Provider". Other "non-contestable" connection works are not open to competition and can only be carried out by the DNO.

Ofgem considers that the scope of activities comprising "contestable works" should be extended to incorporate diversions and connection reinforcement works which:

  • are physically and electrically separate from existing DNO infrastructure.
  • do not require access to existing DNO operational areas.
  • are fully funded by the customer.
  • are restricted to works on overhead and underground cables not exceeding 33kV and on HV/LV distribution substations.

Design of diversionary works for overhead and underground cables not exceeding 33kV and on HV/LV distribution substations should be contestable but otherwise design of connection reinforcements will remain non-contestable. Dismantlement and disposal of existing DNO assets associated with contestable diversionary works will remain non-contestable. Final connection of assets installed as part of diversionary and reinforcement works will also remain non-contestable. These principles apply to both generation and demand customers.

DNOs are to have in place the necessary arrangements to offer these works as contestable activities by October 2006. In order to support the extension of the scope of contestable activities, a number of changes need to be made to the existing arrangements:

  • DNOs will need to reflect the new arrangements in their charging statements.
  • Electricity Connections Steering Group (in conjunction with Ofgem) will need to develop a guidance document to define a standard process for agreeing technical specifications for individual projects by July 2006.
  • DNOs will need to review, and amend as necessary, their contractual arrangements to ensure that issues are adequately managed contractually.

Customers pay the costs of the connection works based on the relevant DNO’s charging methodology. It is anticipated that customers seeking a connection to distribution networks will feel the benefit of these changes through lower connection costs.

To read Ofgem’s decision letter click here.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

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The original publication date for this article was 19/04/2006.