DNOs raise legal concerns about retrospective connections reform

UK Power Networks (UKPN) and National Grid Electricity Distribution (NGED) have raised concerns about the legal ramifications of applying retrospective changes to the connections process.

Both distribution network operators (DNOs) have called for clarification on what legal implications could arise by reordering the existing connections queue.

They claim that understanding the legal implications will be one of “the biggest determining factors in the success, or otherwise,” of the proposal to tackle the 700GW backlog of projects in the connections queue.

The concerns relate to the Electricity System Operator’s (ESO’s) update on its proposals for reforming the connections process to prioritise viable projects that are ready to connect.

As part of the process – dubbed TMO4+ – existing and new projects will have to pass through two formal gates.

At the first gate, projects will be able to apply to the queue during an annual window, where they will receive an indicative connection date based on coordinated network design.

The second gate would then determine queue position for projects once certain criteria has been met, such as having land rights secured and planning permission submitted.

In addition, the ESO is proposing that the indicative connection dates provided at Gate 1 will be subject to change and “may move backwards” if other projects progress faster.

In particular, the DNOs are concerned about the legal implications of applying these new rules to projects which already hold a connection offer.

In its submission to Ofgem’s unofficial consultation, UKPN states that “a key part of unlocking the benefits of this proposal rely on applying the new rules retrospectively”.

Consequently, UKPN adds that it is “imperative” to conduct a “thorough review of the legal implications […] of retrospective application to existing connection agreements” before reforms are implemented.

It adds: “The combination of engagement with customers and legal standing are likely to be the biggest determining factors in the success, or otherwise, of this particular reform.”

Likewise, NGED has suggested that regulatory and legislative changes may be needed to “mitigate risk associated with the proposal”.

“As distribution customers each hold individual contracts with us as their DNO, we need to understand the potential wider legal implications if the customer is in the Gate 1 holding position but continues to hold a firm distribution offer,” NGED’s submission states.

“We are therefore supportive of Ofgem identifying and recommending any regulatory and legislative changes required to enable or mitigate risks associated with the proposal.”

It adds: “Inevitably, we are expecting that there will be winners and losers amongst our customers through implementing the reform.

“To address this, we would value Ofgem supporting a joint ESO/TO/DNO approach to customer communications to carefully manage customer expectations and provide support to minimise any confusion and disruption customers may experience.”

Partners at the law firm TLT previously told Utility Week that retrospective changes of this nature raise the risk of legal challenges.

TLT partner Juliet Stradling said there are three potential routes for legal challenge: a contractual challenge, an appeal to the Competition and Markets Authority (CMA) and an application for a judicial review.

The proposed reforms are being introduced to tackle the 700GW backlog of projects currently in the queue.

The ESO has warned that the queue could exceed 1,000GW if its outlined reforms are not treated with urgency.

In response to concerns raised regarding its TMO4+ proposal, an ESO spokesperson said: “Our TMO4+ ‘first ready, first connected’ proposals would see significant action across the whole of the queue, to drive quicker connections for viable projects by raising entry requirements, removing stalled projects and better utilising network capacity.

“We are continuing to develop our plans alongside Ofgem, government and industry, with a programme of engagement with our stakeholders currently underway. This collaborative process will help to ensure that these enduring reforms best deliver on the objectives of the Connections Action Plan.”

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