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Electricity Distribution


Electricity distribution is the final stage in the delivery (before retail) of electricity to end users. A distribution system's network carries electricity from the transmission system and delivers it to consumers. Electricity distribution charges are included within the fixed charges of an electricity bill.

Ofgem regulates the 14 monopoly regional DNOs to protect the interests of present and future consumers. A price control is set every five years in order to set the maximum revenues that each DNO can collect from customers at a level that allows an efficient business to finance its activities. Incentives are also set on DNOs to innovate and find more efficient ways to provide an appropriate level of network capacity, security, reliability and quality of service.

Business customers face a wide range of electricity distribution bills, with smaller businesses paying around £270 per year, medium businesses around £2,000 per year and larger businesses paying as much as £28,000 per year. Therefore DPCR5 can have a significant impact on your business.

DPCR5 will take effect from 1st April 2010 and will therefore have an impact on electricity consumers as fixed charges on electricity bills will be changing.

What does this mean?

Ofgem are allowing revenues of around £22bn over the five years and £14bn expenditure on the networks. The DNOs will be able to raise their charges by 5.6 per cent per annum on average with a range of between -4.3 per cent to 11.1 per cent across the country.

How will this affect your electricity bill?

Depending on which DNO distributes your electricity the fixed charges on your bill will change accordingly. Please see table 1.0 for the percentage change in DUoS charges depending on what electricity tariff you are on and which DNO distributes your electricity.

The future & the environment

Customers expect the DNOs to maintain the high levels of network reliability they currently enjoy. This will mean a significant rise in investment and maintenance over the next five years. Assets installed in the 1950s and 1960s need to be replaced and additional capacity has to be built where use of the network is growing.

Further investment in the electricity distribution networks is required to make the transition to a low carbon economy. Ofgem are introducing a £500m new fund - the Low Carbon Networks fund - to stimulate culture change, innovation and trialing of the new technologies, commercial and operating arrangements the DNOs will need to deliver a low or zero carbon electricity sector. Ofgem are also putting pressure on the DNOs to do more to tackle climate change for example by reporting on their business carbon footprint, giving due consideration to using demand side management to address network constraints and by requiring them to provide simpler information to local generators who are looking to connect to their networks.

Please do not hesitate to contact us at Energyquest if you have any questions regarding DPCR5.