The regulator decided to give distributed generators (DGs) that were connected to the system before 2005 a 25-year exemption from a new charging regime introduced that year for use of the distribution network.
Chief executive of generators’ trade body the Association of Electricity Producers, David Porter, welcomed the decision. “Without the exemption, many large and small electricity producers would have been hit with charges that they had not contractually agreed to,” he said.
DGs argued that it was an industry-wide understanding that pre-2005 connection agreements covered all connection costs and use of system (UoS) charges.
Porter said the issue was a potential obstacle to vital energy infrastructure investment. “At a time when regulatory stability is essential to encourage investor certainty and get new capacity built, this could have been very damaging. The association has worked hard since 2005 towards achieving a solution on this issue,” he said.
Prior to 2005, DGs paid a connection charge that included the cost of sole use assets, reinforcement of the shared network and in most cases capitalised operation and maintenance payments. They did not generally pay usage charges for energy they exported on to distribution companies’ networks.
Since then, Ofgem has introduced a connection charge that covers only some shared network reinforcements, but it has added UoS charges for DGs.
by Trevor Loveday
This article first appeared in Utility Week’s print edition of 17 February 2012.
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