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Response to Ofgem consultations on DCC activities during the Transitional Phase of the Switching Programme

5 January 2017

We responded to two Ofgem consultations on the DCC’s activities during the Transitional Phase of the Switching Programme:

In our response to the consultation on the DCC’s business case, we welcomed the publication of the DCC’s business case for this phase of the programme, in which they will help develop technical specifications for programme products and procure a central registration service. This set out costs of £25.6m (excluding margin) which will ultimately be borne by consumers. The DCC must carry out its work in an economic and efficient way, while maintaining the confidence and support of key stakeholders in the project. The current business case for doing so is detailed, but contains a large degree of uncertainty of the final costs and the timeline for completing this phase of the programme. The DCC and Ofgem should work to reduce for future versions. It is our view that the majority of the management reserve, designed to account for unforeseen changes, should not be charged upfront, but instead as and when these arise.

A separate consultation on the DCC’s margin and incentives proposed a margin of 8-12% for these activities. In our response we set out our expectation that Ofgem should direct a margin that is commensurate with the degree of associated risk (as it has indicated in prior decision documents). As Ofgem recognise the risk is low for these activities, we suggest it downwardly adjusts the DCC’s margin range. On incentives, we support incentives for timely delivery of milestones. However, we query the proposed options for the incentive curve design, and consider that the DCC should face more immediate incentives to meet agreed implementation milestones. We also consider that, given the importance of stakeholder input to the success of the Programme, margin should be placed at risk as part of a stakeholder satisfaction incentive.