Ofgem has warned electricity distribution network operators (DNOs) to make improvements to connections and environmental outputs, as the regulator published its annual network report on Friday (8 March).
The RIIO-ED1 report outlines key findings for the DNOs’ performance in 2017-18 – the third year of the eight-year price control period, which runs until 2023.
It shows how the 14 DNOs operating in Great Britain, which are managed by six companies, have performed against their agreed outputs and incentives, innovation schemes and overall financial performance.
The regulator said DNOs “continue to perform strongly” against four of the six output categories: reliability and availability, customer satisfaction, social obligations, and safety.
But it suggested there is “scope for improvement” in the connections and environmental outputs.
Source: Ofgem’s RIIO-ED1 Annual Report 2017-18
Despite the potential for financial rewards associated with connecting customers to the network in an “efficient and timely manner” six of the 14 DNOs missed their targets.
Northern Powergrid (both its North East and Yorkshire licensees), UK Power Networks’ Eastern Power Networks licensee, SP Energy Networks (both licensees) and Scottish and Southern Electricity Networks’ (SSEN) Southern Electric Power Distribution licensee were all shown to have missed their “time to connect (TTC) incentive targets.
Ofgem noted this is an improvement on the previous year when eight DNOs missed their targets but said it wants to see all DNOs meet their target and “learn lessons” from those that have.
The TTC sets common targets for the time to both quote and connect customers to the network and resulted in a total payment of £12.8 million in 2017-18.
The regulator said: “Almost all DNOs met their targets for the time taken to quote customers for a connection.”
The report also revealed that customer interruptions has fallen by 11 per cent since the start of RIIO-ED1. The duration of interruptions has, on average, also reduced by 9 per cent in the same period.
Meanwhile all DNOs exceeded their customer service targets and are working to address the needs of their vulnerable customers.
The regulator revealed that at industry level there have been “significant improvements” since the beginning of the price control period in managing the DNOs’ impacts on the environment.
Ofgem said: “All DNOs are on track to meet their targets for business carbon footprint reduction, however, compared to last year, performance against SF6 emissions and oil leakage is mixed. We welcome the DNOs’ commitments to achieve their targets by the end of the price control.”
The report also revealed the financial performance and drivers for DNOs. The companies are currently forecasting to spend £26.6 billion within RIIO-EDI, 5 per cent less than their set allowances of £27.8 billion to deliver their outputs.
In the first three years of the price control period, the DNOs have spent £10.2 billion managing their networks – 6 per cent less than the allowances. Underspend, both forecast and to date, is lower than in previous price controls. Companies retained £359 million and the remaining £325 million will be returned to customers.
Ofgem estimates that the average domestic customer will pay £87 in 2019-20 to cover electricity distribution network costs, up 2 per cent from £85 in 2018-19 (in real 2017-18 price terms), in return for “receiving an improved service”.
The regulator forecasts that the DNOs will collect £5.8 billion through customer bills in 2019-20.
Electricity North West (ENW) was ranked as one of the best network companies in the country for the second year running, having achieved green ratings across all metrics in Ofgem’s annual report.
Peter Emery, chief executive of ENW, said: “We’re working hard for the region to provide a secure and reliable supply of electricity and investing for a zero-carbon future while also keeping bills down.
“We invest half a million pounds a day in the North West, upgrading the network, responding to storms and fixing faults, and investing in innovation to keep costs down while also getting the network ready for electric cars and an expected surge in electricity usage.”
The company scored 85 per cent customer satisfaction, its “highest ever levels” and above the industry-wide target of 82 per cent.
Responding to the report, David Smith, chief executive of the Energy Networks Association (ENA), said: “These figures are good news for the British public. They show how investment in grid infrastructure has significantly reduced the amount and duration of power cuts since 2015.
“Gas network companies are also ahead of expectations in connecting customers who may be struggling with their bills to the gas network. This effort is reflected in the highest customer satisfaction scores received by the electricity and gas networks.
“The scale and pace of change the networks are now facing is huge. New available data will help to create new markets and an internet of energy, which will be responsible for using new smart energy technologies to help decarbonise Britain’s heating and transport.
“What’s vital is that the regulator builds on this success through the next price control, so that network companies can continue to innovate to meet the challenges ahead of us at the lowest cost to the bill-payer.”