DNOs now entitled to charge connection offer expenses for provision of quotation

Distribution Network Operators (DNOs) are now allowed to charge customers a fee for the assessment and design (A&D) costs they incur as a result of a connections application, regardless of whether the subsequent connection offer is accepted.

The new legislation came into force on Friday 6 April 2018 following the government’s response to a consultation, published in late February.

Although legally obliged to provide a connection offer on request, since 2008 DNOs have only been permitted to recover the ‘reasonably incurred costs of providing connection offers’ from those applicants who later accept a connection offer.

However, in the light of responses to the recent consultation, the UK government ruled that allowing DNOs to charge regardless of the outcome, as was the case prior to 2008, is ’fairer’ – citing the high number of speculative applications (triggering assessments that are subsequently not accepted) as the principle driver.

Explaining its decision, the Department of Business, Energy and Industrial Strategy (BEIS) stated it is hopeful that with “more applicants paying towards the costs of preparing connection offers [there will be] further benefits in improving the efficiency of the connections process and the service applicants receive.”

The Government says that this will also support its “commitment to reduce the costs of energy as those projects connecting will pay lower A&D fees.”

What does this mean for customers?

For customers, the change means that as of 6 April 2018 you may become liable to pay the DNO a quotation fee for the network assessment associated with your connections application, irrespective of whether you end up accepting the DNOs resulting quote.

However, given that DNOs have been handed a relatively short turnaround to have any changes to their charging methods for A&D fees approved by OFGEM, as well as being required to notify customers of these changes, it may be that some DNOs do not begin charging until a later date. Even then, this may only occur in certain market sectors (generation rather than demand enquiries, for instance).

The final proposals of most DNOs are anticipated towards the end of April 2018, and they have a responsibility to let you know of any changes in a timely manner.

The SMS view

As an organisation, we understand the rationale behind charging A&D fees upfront and appreciate this change may deter speculative applications. It is however important that the DNOs consider carefully the specific needs of each market segment and not simply apply a broad brush when setting out their proposed charging structures.

We will provide customers a further update on this regulatory change once the DNOs have provided clarification on how they plan to implement the fees and any impact on our existing service provision.

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