National Grid chief calls for ‘fundamental’ network charging review

Ofgem should undertake a holistic review of network charging, rather than looking at “individual elements” like the embedded benefit.

In an interview with Utility Week, National Grid chief executive John Pettigrew said he is “encouraging” Ofgem to extend its review of the embedded benefits regime.

“There needs to be a more holistic review of charging,” he said. “I understand the drivers for the embedded benefit review – looking to make sure that it is equitable in terms of making sure that everyone who is using the network in some shape or form is paying their fair share – but I actually think that it would be more useful at some point, pretty soon, to take a more holistic look. Not just at the transmission charge and the distribution charge but at charging for networks generally.”

In August this year Ofgem published an open letter on its website saying that it believed benefits for embedded generators under the current network charging regime are “distorting investment decisions and leading to inefficient outcomes in the capacity market”.

Ofgem said that amendments to the current regime should be addressed “as a matter of priority” and called for industry input into creating suitable modifications. It hoped to decide on a course of action within the year.

Pettigrew however, warned that a rushed review would be “problematic”.

“Anything that moves away from where we are today will mean winners and losers,” he said.

For example: “If you remove locational charging in transmission and move to a ‘postage stamp’, that has significant implications for northern generators versus southern generators. It might be the right answer. But if you are going to do that you need to manage it very carefully.”

Pettigrew concluded that a “fundamental review” of charging therefore needs to be conducted “in a timely and sensible way, to take all stakeholders with you.”

In October, Cornwall Energy also urged Ofgem against making “rushed changes” to embedded benefits which could lead to “wide-ranging unintended consequences”.

The full interview will be in the issue of 11 November, and online