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Ofgem announced, as of 1st April 2023, Distribution Network Operators (DNOs) will be responsible for infrastructure upgrade costs when connecting new developments. The decision was confirmed in the publication of its Access and Forward-Looking Charges Significant Code Review, as part of the regulator’s objective to ‘reduce the overall connection charged faced by those simply connecting to the distribution network’.

What is changing?

Under the previous arrangement, if a new connection required the DNO to upgrade or expand the capacity of the existing network to facilitate the load for a new development, the developer was obliged to cover the costs of the work. Depending on the development size and demand, the charges often added thousands of pounds to the project costs, which has been a continual source of frustration to developers.

In most cases under the new rules, DNOs will no longer charge for the cost of network reinforcements. The reinforcement costs will be recovered through the network charges in electricity bills.

What are the exemptions?

There is a threshold in place to protect bill payers from having to fund very high reinforcement costs. The new demand connection ‘High-Cost Cap’ (HCC) has been set by Ofgem at £1,720 per kVA, so if the cost of network reinforcements exceeds this amount, the developer will be charged whatever is over the threshold – I.e. if your threshold is £1.7m and reinforcement costs are £2m, the developer would need to pay £300,000.

It should also be noted, the new rules are only applicable to distribution network costs. If reinforcement is needed on the transmission network owned and operated by the National Grid, the costs are still payable by the developer and will be included in your quote.

Our team is well-versed in the frequently evolving energy industry regulations and can provide free independent advice on the options available to you. If you have a question about these changes and how they might affect your development, get in touch.

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