ED2 uncertainty mechanisms leave ‘a lot to sort out’

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Allan Boardman, asset management expert, comments on ED2 uncertainty mechanisms in an article by Tom Grimwood in Utility Week.

Commenting on this, Allan says, “Ofgem have been quite astute. The regulator has had to account for a lot of pressures being faced by electricity distribution networks and the package it has come out with on the face of it, today, looks pretty reasonable.”

He adds, “The challenge then is, of course: what does it look like tomorrow? Our sense is that some of the problems of today are being kicked down the road a little.”

Allan goes on to say, “managing the numerous uncertainty mechanisms, some of which aren’t yet defined and understood properly, will be complex. With the price controls beginning in April, there’s a lot to sort out.”

He explains, “The challenge of distribution networks is actually the low-voltage networks, the domestic side, where an individual project can be completed very quickly in a day, or at relatively low cost, but there are going to be tens of thousands, if not hundreds of thousands of these projects”.

Allan says, “the uncertainty mechanisms will place administrative burdens on both Ofgem and DNOs, noting that the larger re-openers will all happen at the same time. That’s going to be difficult, not impossible, but it needs to be thought through”.

He concludes, “Ofgem’s shift from April to a shallow connections charging boundary – one of the outcomes of the network access SCR – will reduce connection charges and spread the costs across the wider customer base. He said this may have created a disincentive to connect in the meantime, with the result that you might be racking up the last six months’ worth of connection applications to all come in on 1 April.”