We have published our consultation response to DCC Review: Phase 1 consultation.
We believe Option B (an alternative model based on more significant changes to the regulatory arrangements for DCC) presents a better fit with the future energy system and the expected prevailing regulatory, governance and ownership models in the central services space in place by 2030. Therefore, our preferred model is Option B; however, in our response we have suggested ideas for both options.
For Option A:
- We recommend that there should be ring-fenced financial incentives to drive efficient and value-driven behaviours.
- We support DCC being fully funded by users, with shareholder capital considered in exceptional circumstances such as delivery risk, alongside appropriate checks and balances.
- There should also be appropriate oversight to ensure third-party providers are delivering an efficient and high-quality service.
- We support empowering existing Board Directors to work with industry to appoint industry, independent and consumer representatives onto the DCC board.
For Option B:
- We believe that more robust budget control mechanisms need to be considered to manage the large DCC expenditure (around £500m annually).
- We agree with the notion of accountability to DCC users negating the need for an incentive structure, which, in any event, sits less well in a not for profit structure.
- There need to be robust checks and balances on management of supplier contracts to ensure value from procured parties at lowest cost to the consumer.
- There needs to be a process in place, which means Directors can meet their statutory responsibilities and liaise with Ofgem should any conflicts with the law arise.
- There should be a mechanism in the contract to prevent Directors acting in the interest of their employer companies
Whichever option is chosen, we recommend that Ofgem consider Market-wide Half-hourly Settlement (MHHS) as a critical dependency for the transition period as a smooth handover is critical given the DCC’s central role in MHHS to ensure there is no knowledge or skills lag for enabling the delivery of MHHS alongside the Smart Meter Rollout.