Ofgem has given preliminary approval to a request from Scottish and Southern Electricity Networks for a temporary exemption from the prescribed methodologies used to calculate distribution use of system (DUoS) charges.
The company said the derogation is necessary because of an error in the calculation of updated DUoS charges for 2020/21.
However, this does not automatically mean other DNOs will be eligible for derogation.
There are two different methodologies for calculating distribution charges – the Extra High Voltage Distribution Charging Methodology (EDCM) for large, industrial customers connected at the highest voltages, and the Common Distribution Charging Methodology (CDCM) for the rest.
From these methodologies are derived all-the-way (ATW) tariffs for different types of end users, as well as discounted tariffs for licensed DNOs (LDNOs) reflecting their responsibility for operating the “last mile” of the distribution network for their customers.
In April, SSEN wrote to Ofgem to request a sector-wide derogation from the methodologies after the corruption of an ancillary database led to an erroneous “high-voltage split” being fed into the CDCM model.
This refers to the typical proportion of the high-voltage (HV) network which is provided by DNOs in the case of an HV customer connected through an embedded network.
The HV split is taken as an average across all DNOs. Correcting SSEN’s error increased the split by 8.9 per cent to 79.5 per cent and compromised the published DUoS tariffs for all of the DNOs for the 2020/21 charging year.
Implementing the charges would put the DNOs in breach of their license conditions that require them to follow all parts of the EDCM and CDCM.
To address the issue, SSEN has proposed to republish the LDNO tariffs for high-voltage demand, which were worst affected by the error. To minimise the disruption to customers, SSEN wishes to retain the existing ATW, LDNO generation and LDNO low-voltage demand tariffs for 2020/21 as the error had a minimal impact on these rates.
Ofgem said it is minded to approve a derogation for SSEN itself. “We recognise that SSEN has informed us of the error in the HV split percentage that affects all DNOs and has taken steps to communicate and assess the impact on stakeholders,” it explained.
However, the regulator said it cannot do the same for the other DNOs, which will each need to submit their own “acknowledgement and confirmation” by 9 September.