Citizens Advice responds to Ofgem’s consultation on Locational Charges and Regulatory Siting Levers Under Reformed National Pricing
Citizens Advice priorities
Our overall priority in approaching this consultation is to advocate for the least-cost whole-system development, as this will deliver the lowest consumer bills. As outlined in our response to the Draft Determinations for RIIO-3, Ofgem should consider that rising bills could erode public trust and confidence in decarbonisation programmes.
We feel that consumer priorities could be better reflected in Ofgem’s assessment criteria. We have suggested increasing the weighting for efficiency most heavily, followed by coherence and the consumer risk allocation.
Our preferred approach
The current Transmission Network Use of System (TNUoS) charge sends a fairly strong locational signal, yet constraint costs are very high and growing. Of the options Ofgem has outlined and based on the information provided at this stage, we can see the case for Option C (a system and constraints impact charge). Our initial assessment found that it has benefits for: Efficiency (as it reveals hidden constraint and balancing costs borne by consumers); Wider system value (as it can act as an administrative proxy for whole-system locational value and constraint impacts), and Coherence (due to its fit with both near-term locational CfD and connections objectives and potentially locational pricing in the longer term). Additionally, under this option, we judge that consumers would be less likely to bear disproportionate risk.
We would appreciate Ofgem sharing its own methodology and results of its initial assessment of the models.