In 2022, Ofgem published the DCC Oversight and Regulatory Review, inviting responses until January 17th 2023. The DCC are responsible for establishing and operating a secure national communications network for smart metering in Great Britain. The DCC’s current Smart Meter Communication License expires in 2025 and Ofgem are reviewing the regulatory arrangements to be put in place following this period. You can read phase 1 of the review here.
We welcome the opportunity to respond to this consultation. Our non-confidential response represents the views of RECCo and is based on our role as operator of the REC, which includes governance of the Central Switching Service (CSS), operated by the DCC.
Below is a summary of our response – our full response can be read here.
RECCo supports the holistic development of new arrangements for the governance and funding of the DCC, building upon the proposals under Option B;
Option A is unlikely to address the misalignment of interests inherent in the current model;
Notwithstanding the current pressures upon Ofgem, the decision on which model to progress and over what timescale must be taken on its merits, and cannot appropriately be influenced by Ofgem resource constraints or competing priorities;
There is opportunity for incremental improvement ahead of 2025, increasing certainty reducing risk, both for the transition and to potential service providers; and
The Central Switching Service is a distinct business and should appropriately be unbundled from the smart communications business, allowing each to be governed and to develop as appropriate, rather than compromised by the interests of the unrelated business.
Our response to the consultation questions can be read here. We appreciate the reasonable time period that allowed us to respond to this consultation. We would be happy to discuss any of the points raised in further detail, whether technical or regulatory.
Ofgem published their decision to extend the Market Stabilisation Charge and the Ban on Acquisition-Only Tariffs (BAT) until March 2023 in August last year. However, in light of feedback on this decision, they opened a consultation in November which proposes that the MSC and BAT are extended until March 2024, with a decision expected in February 2023.
As such, we provided the below response.
Supplier obligations regarding the Market Stabilisation Charge (MSC) were formalised into the REC through REC Change Proposals R0034 and R0035 in April and June 2022 respectively. The responsibilities of RECCo in administering the Market Stabilisation Charge, as well as those of impacted parties, are now set out in Schedule 22 of the REC. We have a flexible procurement strategy and have already made provision for an extension of the scheme beyond the initially identified March 2023 end date. We can therefore confirm that the extension of the MSC as proposed in this consultation poses no operational issues for RECCo.
Since Ofgem announced its intention to implement the MSC measure and throughout our development and mobilisation of the operational process, we have consulted with relevant stakeholders and informed them of how they will be impacted. We have continued to provide this support, including renewed efforts to raise awareness through channels such as webinars, newsletters and published guidance documents since the MSC was first triggered in November. We will continue to provide such support as long as the MSC remains in effect.
Read our feedback to the consultation questions in full here.
Ofgem this week published its decision on the new Price Control mechanism designed to incentivise the DCC in its switching roles. This includes a determination that DCC will be permitted to earn a margin of 7% on its switching activities from 1 April 2023, when recovery of those charges migrates from the Smart Energy Code to the REC. This is at the lower end of the range consulted upon by Ofgem, and significantly lower than the margin DCC currently earns for its smart meter activities.
The DCC margin will be subject to it meeting its Service Level Agreements (SLAs), as set out in the REC. Failure to meet those SLAs will therefore result in a reduced charge to RECCo, which will subsequently be passed through to REC Parties.
It is expected that the new Switching Incentive Regime will be complementary to the DCC Service Provider Charges, which RECCo consulted on last Spring and progressed through the change management process as REC Change Proposal R0025. Ofgem has indicated that we can also expect a decision on R0025 by the end of January.