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Request For Comment DN Entry/Exit Charging Consultation
The Gas distribution networks (GDNs) have published this consultation to seek views from stakeholders and support the development of a case to Ofgem on changes to the GDN entry charging arrangements. These aim to remove barriers to entry gas through a change to the connection charging boundary, in which wider network users would fund a proportion of the reinforcement costs.
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Currently, if connectees request to connect onto the gas grid where existing entry network capacity is not available, reinforcement is required to create the additional capacity to accommodate these future requirements. In the current charging arrangements for entry, the reinforcement cost associated with connecting falls entirely on the connecting party (e.g. the biomethane producer).
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The deep connection cost and lack of cost socialisation is a disincentive to entry and acts as a barrier to new entrants who are unable to secure network capacity at an affordable price.
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The gas networks are therefore consulting on four different options that would reduce the extent of this barrier by socialising a proportion of reinforcement cost:
High Cost Cap consists of a uniform cap applied nationally, such that reinforcement costs are socialised up until the cap level, and the connectee would cover the increment above the cap. The level of the cap would be set so that existing customers are protected from costs that would be excessive and uneconomic to bear. (GDN Preferred Option)
Reinforcement Prices gas distribution networks would publish detailed prices ex-ante to users connecting, having already factored in a proportion of reinforcement costs to be socialised, depending on the demand and capacity in that location. Different prices would be set at different locations.
All or Nothing Cap a common cap would apply across all potential entry sites. This would need to be set at a higher level than the HCC to allow sufficient entry. Below the cap all costs would be socialised, and if reinforcement costs are above the cap, the connectee would pay the full cost
Entry Test an entry test applicable to all connectees which values the carbon offset from connections as a benefit and compares this to the reinforcement costs of connection using BEIS carbon values and considering the volume of gas injected. Where the social benefit of connections exceeds the cost of connection, the reinforcement costs are socialised, and where the cost of connection is greater than the social benefit the connectee pays the difference between the excess cost and benefit
