Decc said the new rules, proposed in the draft legislation on energy presented to Parliament in January, could deliver £380 million of savings to consumers in “operational costs alone” over the 25-year lifetime of the licences.
It said the rules would also “encourage new players into the energy market, foster greater innovation and competition, and create a diverse and flourishing network sector”.
Under the proposals for competition for onshore licences, bidders would compete to build onshore transmission infrastructure over £100 million in value.
But in response to a consultation by Ofgem that closed in January, National Grid Electricity Transmission (NGET) said the proposals have an “over-reliance on analogies to the offshore transmission owners’ (OFTO) regime” and do not take into account differences between offshore and onshore assets.
NGET said the financial benefits to consumers require “further assessment” and also expressed concerns over the impact of competition on the overall reliability of the transmission system.
Distribution network operators (DNOs) echoed the concerns, saying the wider network impact has not been fully addressed, and they have not been adequately engaged with the process.
DNO Electricity North West (ENW) said in response to the consultation that further engagement is required with “other industry participants” to ensure there are “no unintended consequences”.
ENW said: “Our primary concern is to understand the potential impact on our customers and the steps that will be taken to minimise any unnecessary confusion or disruption.
“We believe it is essential that any mechanisms introduced for the competitively appointed transmission owners reflect the potential consequential impact of interruptions on the transmission network for distribution operators and the customers we serve during construction and ongoing operation of assets.”
The cost of transporting electricity from generation to consumer made up almost a quarter of the average electricity bill in 2014.
Ofgem said it expects to run the first competitive tender for onshore transmission in 2017.