National Electricity Grid Faces Ofgem Review

The energy regulator Ofgem has announced a comprehensive and open review of the charging regime and associated connection arrangements for using Britain's high voltage electricity network and high pressure gas grid.

The electricity and gas grid charging regimes have served customers well, for example, by encouraging power generators to locate close to where electricity is used.

However, Britain is facing an unprecedented challenge as it moves to a low-carbon energy system and new kinds of generators such as wind and wave power stations have less flexibility on where they are sited. This is an important issue for Scotland as many low-carbon generators choose to locate there because of the favourable geographic and weather conditions.

Ofgem has launched Project TransmiT to ensure the regimes promote security of supply and a low carbon future, while keeping the cost of transmission to customers under control.

Alistair Buchanan, Ofgem's Chief Executive, said: "Project Discovery identified the need to invest up to £200bn to secure low-carbon energy supplies for Britain. The electricity and gas grids play a fundamental role in meeting this huge challenge. Project TransmiT will consider whether the way in which grid costs are shared between users needs reforming."

The review is in line with the clarified sustainability duties that the Energy Act 2010 has given Ofgem in April, and the terms of the Third EU Energy Package passed in September 2009. Also, from the New Year, industry parties and Ofgem will have the ability to instigate changes to the charging regime following reform of the industry governance arrangements.

Stuart Cook, Senior Partner, Smarter Grids and Governance, said: "As a first step Ofgem has published a call for evidence seeking views on the scope and priorities for the review and any objective analysis from all parties with an interest in the charging regime.

"Initial proposals will be published in spring 2011 with a decision on taking these proposals forward to follow in the summer."

The project will be set in the context of the Government's review of wholesale electricity market arrangements as well as cross-Europe issues, such as increased electricity interconnection between Member States, and other market and regulatory developments.

(GK/BMcC)