Ofgem has hinted that its next DNO price control will take a ‘tough but fair’ approach in order to support decarbonisation.
The UK regulator, Ofgem has reiterated the importance of price control in terms of supporting the decarbonisation of the nation’s energy network. From 2023, a ‘tough but fair’ approach has been proposed for electricity distribution network operator (DNOs) price control.
Ofgem published an open letter to gather feedback on how it can ensure the UK’s 14 DNOs reduce their carbon emissions without passing on high prices to the consumer.
In the letter, the need for price control is emphasised with the suggestion that the revenue of DNOs could be impacted if changes are not made to deliver outcomes “that go beyond the delivery of traditional network services”.
“This could include the decarbonisation of the transport or heating sectors or tying revenues to outcomes that complement government goals such as reducing peak prices, increasing renewables and reducing demand on the network.”
It is thought that implementing these measures would force DNOs to up their game in terms of reducing emissions.
Ofgem now seek the views of stakeholders in regards to matters such as; the duration of the price control, how the cost of capital should be set and the extent of the role DNOs will play in decarbonising the network.
A formal consultation will be published in 2020, outlining its proposals for its regulatory framework for DNOs.