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DNOs facing £13.9 million penalties over potential failures

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Distribution network operators (DNOs) are facing a combined potential penalty of £13.9 million from regulator Ofgem for under-performing in providing connections to their customers in the latest example of the hardening stance being taken against network operators.

Ofgem this morning published a consultation outlining concerns levelled at the UK’s six DNOs over how well they are dealing with new customers that request connections, many involving poor communication.

All DNOs with the exception of Northern Powergrid faced criticism from stakeholders on this point, most notably Scottish & Southern Electricity Networks (SSEN) and Scottish Power Electricity Networks (SPEN).

The latter of which was said to have individuals purposely being obstructive, a number of engagement meetings were declined and concerns were raised in meetings that were not addressed.

Other accusations levelled at DNOs vary, with Electricity North West found to have missed connection dates and customer satisfaction charges; SPEN, Northern Powergrid and UK Power Networks (UKPN) all thought to have issues related to the provision of emergency response cover; while failure to provide justification for delays or missed targets was found across all six.

The biggest potential loss of revenue could be levelled at UKPN, which could face a penalty of £4.62 million for a range of issues including failure to invest in ageing sections of the network, missing a connection time improvement target of 20% and lacking justification for not completing trial projects.

Potential loss of revenues for DNOS - £13.89 million

DNOPotential penalty (millions)
Electricity North West £0.62
Northern Powergrid £1.08
Scottish Power Electricity Networks (SPEN)£2.58
Scottish & Southern Electricity Networks (SSEN)£2.90
UK Power Networks £4.62
Western Power Distribution £2.09

The consultation follows the introduction of the Incentive on Connections Engagement (ICE) by Ofgem as part of its 2015-2023 price controls to encourage DNOs to provide a good level of service and engagement to customers who are seeking a connection.

In order to meet the minimum criteria outlined in the ICE guidance document, DNOs must show they have responded to their customers and if they fail to do so, the penalties being consulted on may be applied.

It has been published to get further stakeholder views to particular questions which have arisen from responses to a previous consultation and the reports submitted by the DNOs.

“Having assessed the submissions and stakeholder responses, we have identified potential issues with some aspects of the performance of all the DNOs which we want further information on… At this stage, we consider that there may be a case for applying penalties against all the DNOs,” Ofgem stated today.

The consultation, which is open to responses until 18 September, is the latest example of stricter rules being introduced to govern DNOs after Ofgem said last month that network operators should prepare for tougher price controls.

This comes at a time when DNOs could see more funds arrive in their coffers as a result of Ofgem’s Targeted Charging Review which is seeking to reform residual charging across transmission and distribution networks to spread revenues more evenly across the two network levels. 

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