Electricity distribution rebates to suppliers
Consultation
- Upcoming
- Open
- Closed (awaiting decision)
- Closed (with decision)
- Publication date
- Industry sector
- Distribution Network
The purpose of this document is to set out a revised regulatory framework that provides DNOs with appropriate incentives to set distribution use of system (DUoS) charges based on accurate forecasts of actual and allowed revenue. Since April 2000, seven DNOs have provided a total of 14 rebates to suppliers. A rebate typically takes the form of a credit against future charges for the use of the distribution system. By providing a rebate, a DNO may avoid the penalties that would be associated with recovering more than the revenue allowed by the price control framework. The provision of rebates appears to be inconsistent with the development of charges that meet the principles of predictability, transparency and cost reflectivity. These principles are set out as some of the objectives of Ofgems review of the structure of electricity distribution charges.The main decisions on proposed changes to the regulatory framework to apply from April 2005 are that:
- DNOs should only be allowed to give rebates with the prior consent of the Authority
- the notice period for DUoS tariff changes will be reduced to three months
- a deadband will be introduced within which penal interest rates will not be levied for over or under recovery of less than or equal to two percent of allowed revenue. The interest rate in this band will be equivalent to the base rate plus one and a half percent
- the penal interest rate levied on the whole amount of any over recovery if it is greater than two percent of allowed revenue will be reduced to base rate plus three percent and
- DNOs will be required to include information on any recent or proposed rebates in an annex to DUoS charging statements.
- Ofgem welcomes comments on the implementation of the decisions set out and the issues discussed in this document - in particular it would be helpful to receive proposals on the form of any changes to standard or special conditions of the electricity distribution licence. Comments should be received by 20 February 2004.
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