Podcast: Holding networks to account with Alasdair MacMillan, Ofgem

00:02:14 – 00:02:45 – Kyle Murchie

Hello and welcome to a Connectology® podcast. I’m Kyle Murchie and I’m really pleased to be joined by Alasdair MacMillan from Ofgem. Alasdair, it was only a year ago I think if we think pretty much the day that you were here sitting with Catherine and I walking through the topic that we’re going to be discussing today, which is the connections end-to-end review. Maybe to kind of open up, it would be great to just hear a bit more about where you sit in the Ofgem team and then how do we get to this point, and what’s the kind of journey so far?

00:02:45 – 00:04:39 – Alasdair MacMillan

Yeah, so yeah good to be back, Kyle, thanks for the invitation. So yeah, we’ve come a long, a long way in a year and lots has, lots has changed, and in other ways lots is, remains the same.

So, what, where I sit in Ofgem; so I look after what we call like future connections policy. So, we’ve also got Connections Reform, which is now moving into the early stage of implementation, sort of alongside that, the area that I look after is really about the future of connections policy, like within that new reformed process. And the sort of key, the key part of that or the key I guess vehicle that we’re moving forward with is what we call the end-to-end review. So, this is a review that we first announced in the Connections Action Plan, which I think was getting my dates right, November, 2023; and what we always said with the connections end-to-end review – so it’s, it’s effectively a review of the whole end-to-end customer journey, and it’s through connections and it’s looking at, you know, achieving two key outcomes. So increased standard of service for connecting customers, and timely connection delivery, and we’ve always been clear that we needed sort of the two things to work in parallel.

So, you needed a reformed connections process, which as we see now is, is underway, but we also need the review to make sure that the regulations, that govern the customer journey, deliver those two key outcomes of, yeah, good standard and service and timely connections. So, that’s the bit I look after. So yeah, we’re not here to obviously talk about Connections Reform, there’s better people than me to talk about that. But yeah, the end-to-end review is, you know, is the really the real thing here that we we’re keen to push forward with now.

00:04:40 – 00:04:51 – Kyle Murchie

Great. And it’s probably worth noting, so the paper is obviously pulled out into seven themes, which was as kind of how you ran the consultation last time.

00:04:51 – 00:05:00 – Alasdair MacMillan

Yeah.

00:05:00 – 00:05:01 – Kyle Murchie

It’s probably worth noting as well that there’s obviously a few decisions that we’ll run through today, and there’s quite a lot of material in the document. What, 112 pages, I think?

00:05:02 – 00:05:21 –Alasdair MacMillan

Yeah, sorry about that.

00:05:22 – 00:06:14 – Kyle Murchie

So, there’s quite a lot of information that we won’t ultimately get onto in this podcast, but we’ll try and kind of go through each theme and get a bit of a feel for the big kind of decisions that we made, but also importantly areas where the decision hasn’t been made yet, more of a proposal based on the feedback you’ve got. And if people just were talking about the consultation that’s now open, so is it open now?

00:07:23 – 00:08:15 – Alasdair MacMillan

It’s open now. And I mean, I, yeah, appreciate as ever, like for a number of years now, there’s been so much going on in connection. So, yeah, apologies to everyone for yet another consultation, but the way that we’ve sort of set the review out. So, within each of the seven themes that we’ll come on to, there’s effectively a set of decisions that we feel, you know, we have enough of an evidence base, to work with that we feel we can just kind of go into implementation. So, there’s things that we’re going to be pushing forward, and we frame those decisions in the document and starting work on those, like immediately – like already.

And then there’s elsewhere, there’s proposals for further consultation. So, this is where we feel we need to go back out to industry stakeholders and just understand a bit more and that the process for that consultation process will open. Will, well, it’s open now until the end of February.

00:08:15 – 00:08:16 – Kyle Murchie

Brilliant.

00:08:17 – 00:08:19 – Alasdair MacMillan

So hopefully enough time on the back end of New Year for people to really get their teeth into this.

00:08:20 – 00:08:23 – Kyle Murchie

Yeah. So, nobody has to worry too much before Christmas?

00:08:24 – 00:08:24 – Alasdair MacMillan

No, No.

00:08:24 – 00:08:24 – Kyle Murchie

Okay.

00:08:25 – 00:08:27 – Alasdair MacMillan

I, I’d be surprised if they never even read it before Christmas, with everything else that’s going on.

00:08:28 – 00:08:29 – Kyle Murchie

I have.

00:08:29 – 00:08:33 – Alasdair MacMillan

You might be the only one – you and lots of AI.

00:08:34 – 00:09:30 – Kyle Murchie

Lots of AI

Yeah. So, what we’ll do is we’ll kind of go through the themes, can obviously we won’t, as I said, to go into all the detail, but I think, you know, theme one, starting off with theme one, which is improving visibility and accuracy of connections data, obviously a really big topic. Something that’s to be fair has been improving over, over time, you know, you see a lot of information in open data portals that DNO level, for example, there is expectation that there’ll be more information coming out at transmission level with the likes of the transitional plans and, SSEP, etc., more data coming out. But of course, there’s a bit of a challenge at the moment of, and the kind of lack of transparency, and maybe other areas where data could be, could be drawn out, other quality, challenges as well.

So can you maybe just kind of summarise, so what’s the first kind of couple of key decisions that?

00:09:31 – 00:11:30 – Alasdair MacMillan

Yeah, so this is about accuracy and visibility of connections, data, and, and like you said, networks have, have done, you know, a lot of really good work already on data accuracy and visibility. And we just see this as like in an extension of that; so, it’s just introducing some new regulatory requirements to sort of make that even better, you know, and in some cases just sort of backing a regulator requirement that ensures, networks, you know, have a requirement to do what they’re actually already doing in some cases.

So, the real proposals here are so it is, we’d like to see, I guess more coordination between the different DNOs and TOS as to the types of data that they’re publishing, and the frequency with which they’re publishing it. So, you know, let’s sort of see the networks sort of operate to the standard of the network, that company that might already be doing this to the best level.

So lots of sort of, what we want to see is lots of industry collaboration to sort of get to a point where you have agreed, you know, agreed data, agreed sort of frequencies and then, you know, within collaboration with developers and, and maybe even third parties who, you know, want to see this data published because they can then innovate with it and develop solutions that would benefit connecting customers.

And therefore, you know, the, because the more data that we have available and the better quality it is, the better informed then the customers that are seeking to connect to the grid are, and the sort of smoother their journey through the process and the less sort of handholding maybe with the network company will need to do with them because they’ve got a more informed customer. So, it’s really, there’s really a win-win in terms of like specific proposals, so demand capacity register.

00:11:31 – 00:12:20 – Kyle Murchie

Yeah, we saw that; that was a fantastic thing to kind of read us as we’re kind of running through, because obviously that’s something that’s been raised by a lot of the development community for a while and we think it’s going to have a real big benefit as well because if people have visibility of what are the demands in that area, you can quite quickly work out what are those capacity now, obviously with the SSEP in the future as well and the RESPS that will help coordinate an understanding of what will be there, you know, what’s there now, what’s going to be there in the future, what additional work needs to be triggered and actually, I think, reduce quite a lot of discussion and, and potential interest in certain areas from demand customers. So, I think that’s a really good, good move. So, what’s the mechanism for doing that then, for getting that data released?

00:12:20 – 00:13:25 – Alasdair MacMillan

So, we’ll move into, like, immediately into, a phase of sort of working closely with the network companies, you know, through a series of, of workshops to understand how this could be sort of brought into practice. And we also need to think about where it sits in the regulatory framework. And I guess that is another point around the data accuracy and visibility. There are lots of existing requirements on network companies and, you know, to sort of produce certain tools to a certain standard and provide certain data. So I think with there’s, there’s a visibility piece there and a potential, pulling together, if you like, of where the different regulations sit and making sure it’s transparent; like what is required on regulated parties in terms of data provision, and as part of that, we’ll be thinking about where an appropriate home would be to sort of bring in a requirement for a demand capacity register. So those two things are, you know, how is it developed? That’s what we’ll work with, with industry on. And then, you know, we’ll think about how to appropriately require it.

00:13:26 – 00:14:35 – Kyle Murchie

Yeah, okay. I think on that, you know, you mentioned as well workshops and you know, having kind of networks convening workshops with industry. It’s interesting because quite recently there’s been a bit of talk around a possibility opportunity, not necessarily just the need, but also the opportunity of having something similar to what would’ve once been the DDR steering group, DDR connection steering group, obviously the reason that Went away was because the DNOs took on an awful lot more of that engagement directly which has, you know, worked well in certain areas, but it doesn’t have the ability to, I suppose, get everybody around the table. So, if developers are coming in and other stakeholders want to come in around the table with the DNOs in one room, kind of coordinating maybe by the ENA, then that type of what coordination might be a really good place as well  to draw out data requirements and kind of what’s needed for, yeah you know, we talk about connections, but of course we are really talking about everything from feasibility all the way through to energization and beyond, you know, into the operational phase. So yeah, quite a, a kind of vast array of potential information.

00:14:36 – 00:16:08 – Alasdair MacMillan

Yeah and absolutely, I mean, we are talking about the entire connect, you know, the connections customer journey here. So, you are right. I mean, the ENA do a great job of, of like coordinating, you know, the network companies sort of, and then sort of working to a common, is it exam question or a particular outcome? And fostering that collaboration and what, what we’ll be seeking for them to do here, and I know in ENA would want to do this anyway, but the, to bring in, you know, the developer community and, and really understand what data do they need for their needs at what frequency, et cetera. And then I think the really sort of good thing about lots of the proposals decisions we’re setting out here is that we already have a very well-established sort of governance framework for moving sort of actions through the process following the Connections Action Plan. So, we have the Connections Delivery Board, which is a sort of strategic group, that seek to ensure or hold, I guess, hold action holders to account against delivery.

So, off the back of the end-to-end review will be establishing a new sort of actions tracker that will then be tracked through the Connections delivery board, and ENA’s SSEG, you know, report into that board, so I’d see that the kind of ENA’s role here is to do that industry coordination piece and then move solutions through SSEG, and then it can be governed through, governed through CBD. There’s already an established framework through which we can actually start to deliver some of this stuff.

00:16:09 – 00:16:20 – Kyle Murchie

Yeah, which is great and it’s great using what’s already there and, what’s already been working, but trying to, as you say, lay that additional government on so that the kind of tracking of all the actions through the process.

00:16:21 – 00:16:22 – Alasdair MacMillan

Yeah.

00:16:22 – 00:16:31- Kyle Murchie

Do you think it might be worth, kind of then moving on to theme two,  which is quite a big one, improve standards of service across the customer journey – so quite broad.

00:16:31 – 00:16:32 – Alasdair MacMillan

Yeah.

00:16:32 – 00:16:52 – Kyle Murchie

But looking at some of the decisions, so the first couple of decisions around, you know, exploring the introduction of licensing conditions to attach milestones to the customer journey. So, when you’re talking about milestones there, we’re not talking about additional customer queue management milestones are we we’re talking about milestones as part of the journey for networks. Is that right?

00:16:53 – 00:18:41- Alasdair MacMillan

Yeah, no, absolutely. So, we recognise when we undertook the end-to-end review that there’s a lot of focus on the standard of service that’s required at specific points along the customer journey.

So, let’s say for example, around the creation of an offer, you know, there’s this sort of set timeframes within that which that must happen. What seemed to be lacking were sort of additional milestones or standards of service, you know, maybe at the pre-application stage or maybe once the offer had been accepted at certain points along the customer journey, and obviously those, the sort of time to time to quote type requirements are very useful for, well, two things. So, one – managing customer expectations. And two – holding the network company to account against a specific timeframe within which they must perform an action, so what this theme’s really looking to do is to sort of apply that principle at different stages throughout the journey.

And we’ve set out some examples in the consultation around sort of milestones we think could be effective for this kind of requirement, and we’re sort of seeking views on whether that would be appropriate, have we missed any, are there any that would be particularly better than others, for example. And then of course the aim here is to ensure that, you know, you have a customer that’s entering the process and they’re confident that, you know, at pretty much every stage of their journey through, from the point at which they conceive that they might wish to connect to the grid through to beyond the point at which they’re actually connected, there are sort of clear, transparent requirements, they understand exactly what the network company needs to do for them at different stages of the journey.

00:18:42 – 00:19:55 – Kyle Murchie

Yeah, and it’s great, we were talking earlier about a particular anonymized example where, you know, there is a project out there at the moment, which has already sunk 150 million pounds into its connection, it’s a battery that’s effectively ready to go, but it can’t move forward and get connected because of a failure on the TO side, which they’ve admitted it was, you know, effectively  some investment works weren’t carried out when they’d initially been planned; they only carried out half those works, and that’s now being recognized and as being addressed, but it’s not being addressed in the timeframe of the connection date. So, the customer has to take the burden of that and obviously we’ll come onto implications of connection dates moving back, et cetera, and the in kind of later themes.

But I suppose under this theme, that would be something that would be caught much, much earlier where the milestones should be in place to kind of manage and have that transparency. But what would, so if a TO or a DNO, or NESO didn’t meet a particular milestone, is there, what’s the impact?

00:19:56 – 00:22:09 – Alasdair MacMillan

Yeah, I mean there’s options there that, you know, it could be a simple sort of license requirement, which would then constitute a license breach, and obviously we could then, you know if circumstances deemed that it was appropriate, we could then enforce against that breach. Or it could be like a financial penalty, like a GSOP type payment that would need to be, you know, automatically paid out, if not met. So, for example, just to give a completely hypothetical example, you know, we often hear that sort of following the sort of, you know, an offer going out and being accepted, it might then be some period of time before the customer gets clarity on next steps or, you know, the appointment of key project personnel to their project. And, you know, we want to avoid situations where the customer is sort of left in sort of a bit of an uncertain space around, you know, how they should progress their own project because they’re not sure sort of what progress is being made on there on the network side. So, it’s looking to, you know, maybe there’d be a timeframe within which, you know, a key meeting must take place where certain information is then provided to the customer, and then if not met, then the network company would then have to pay a penalty.

I mean, the real, I guess what we’re not looking to do there, and this is a really key point, is to put all the risk onto the network company and say, because you know, there are circumstances sometimes which dictate that, you know, maybe a milestone might be missed, we’re not looking for this sort of sum to be cost reflective in any way, it just needs to be, you know, as, as GSOPs currently are across infrastructure and retail just kind of, I guess sharp enough that it changes behaviour and it actually prevents to the extent it can prevents the milestone being missed in the first place, because we’re looking to sort of prevent here as opposed to cure. We’re looking to get to the a point in time in which, you know, all these milestones are met because, you know, this is clear transparency, on the customer side, on the network side as to the, the standard of service that’s expected.

00:22:10 – 00:23:21 – Kyle Murchie

Great. And I think, yeah, on that point, you know, milestones, yes, there will be some occasions where milestones might not be met, and you know, the example that we’re talking about a minute ago in that battery project transmission connect battery that’s ready to go is a good example where, you know, that might not have been prevented; you know, that situation might have still happened, but I think it’s thinking and that for us, and a lot of the feedback that we get is also about: okay, if something happens and it’s detrimental to the project, detrimental to the connection and industry more broadly, how do you then move that forward? It’s getting people engaged enough to go, right, let’s get into solution mode and actually help find solutions. Well, I think we’ve got a bit of a gap in is okay, there’s an issue that’s raised well, okay, the next solution is, let’s close this off by, you know, putting in, you know, fixing it the way we should have done in the first place, not necessarily looking at, okay, is there an alternative way now, now we’re in this situation, what could we do to, to kind of go back and manage. So, but it sounds though that within the consultation, there’s room for that sort of feedback to be..

00:23:22 – 00:24:39 – Alasdair MacMillan

Yeah, no, absolutely. Yeah, I mean as ever with these consultations, you know, the, we’re really keen to hear both, you know, general views and also to the extent that they can be shared, like specific case studies on examples of where, I mean, just on this theme, for example, you know, if anybody could tell us about an example of where, you know, as a developer you maybe felt like you were on the sort of wrong side of the network company for example, you are not doing something within a required timeframe or to the standard that expects, it’s not just about timeliness; there’s also a sort of quality-of-service question here as well. So, any case studies that are out there where, you know, it would be clear that actually milestones of this nature would’ve helped to sort of protect against that occurring, we are very gratefully received and help us build up that evidence base to understand, okay, what areas of the customer journey should we really be targeting these requirements? You know, where is, what is the sort of measurable, definable event along the journey where you could in introduce, you know a milestone that it is very clear, if it’s not met, here’s the, here are the consequences.

00:24:40 – 00:24:50 – Kyle Murchie

Great. So, I think for our audience, that’s a bit of a call to action, you know, if you’re going to be responding to the consultation, then obviously respond in full as much as possible, but actual, proper examples.

00:24:51 – 00:24:53 – Alasdair MacMillan

Yeah, evidence based is always best. Yeah, absolutely.

00:24:54 – 00:25:40 – Kyle Murhcie

Great. I think that takes us on quite nicely to theme three; so that was the requirements of networks to meet connection dates in connection assessments, and obviously with this one, it’s, that’s the requirement of networks to meet those dates. And there was a kind of back ended theme five, which was then the ambition, yeah, so I suppose the, they’re going to come hand in hand, definitely, so exploring strength in GSOP and we were quite keen to see that and really support additional kind of GSOP extensions. So you are obviously proposing to extend that to transmission and the sounds of it also strengthen that at the distribution level as well, whether that’s kind of visibility and scope. So maybe if you can chat through that a little bit more?

00:25:41 – 00:28:05 – Alasdair MacMillan

Yeah, I mean, theme three’s a really big one and like you said, Kyle, it does come hand in hand with theme five, at a very, very high level, what we’re looking to do here is ensure that, I guess network companies are appropriately incentivised or required to meet connection dates in connection agreements, and that effectively there are consequences if they don’t. Now of course, that then does then raise the question of, does that create a kind of behavioural incentive, the long date offers, to make them easier to achieve and harder to miss – that’s theme five on ambition, and we can talk a bit, about how we think we can balance the two.

But certainly, the goal of theme three is to send that signal, that financial signal to say if you don’t meet a connection date, you will feel some consequences, and again, I’ll make the point again, this is not, we’re not trying to be introduce something that’s in any way cost reflective here, you know, clearly developers entering the industry need to accept some element of risk and the risk can’t be all on the network companies because that could lead to disastrous consequences; it’s more the case that, you know, there are, okay, there are some GSOPs now at distribution, there’s nothing at transmission – and that effectively means that there is no, there’s no real sharp penalty or consequence against late delivery or missed delivery, and we think that it would create good outcomes for connecting customers if there was something of that nature provided for in the regulatory framework.

We have a lot of stories from developers, you know, different case studies of different reasons why, a connection date has been missed, and it’s clear that in not in all cases, but in, you know, a number of cases, it’s comes down to what would appear to be, you know, network company under performance in some way. And of course, you know, no, organization’s perfect mistakes get made – we recognize that. But what the, what this is seeking to do is to sort of send the right signal to sort of prevent those occurrences happening as much as possible.

00:28:06 – 00:28:40 – Kyle Murchie

Yeah. So, we’re talking about GSOPs that will be more throughout the customer journey and transmission and distribution. Interestingly, obviously you mentioned and completely understand that it can’t be fully cost reflective, any kind of penalty. But interestingly we are talking about moving away from the, or potentially moving away from the idea of, you know, limited damage, liquidated damage has been set at zero, you know, so that’s quite interesting when you, you’ve got that as a proposal and you’re also looking for feedback. Just what sort of information would be quite key for you going through the consultation?

00:28:41 – 00:30:29 – Alasdair MacMillan

So, we now, so obviously there are other industries, construction being a good example, where liquidated damages would feature a standard in contracts there are obviously very, very good reasons as to why that’s not the case in connections, you know, construction for example is a competitive industry; here we’re trying to regulate a natural monopoly and we need to ensure that, you know, there isn’t disproportionate risk on the networks such that they, you know, remain, you know, able to perform there, you know, the tasks that they’re sort of set up to do; we do know of international examples where there are an element of liquidated damages provided for a standard, in contracts. We’ve again heard from developers, they consider that it’s sort of odd that there isn’t at least some provision for liquidated damage as a standard. I think there is an ability through the CUSC so that they can be introduced, we know that they’re dominantly not, and we’d like to understand the reasons for that, so that’s another area we’re looking to consult on. This is a very, when we talk about sort of GSOPs at milestones, that’s something that we’re sort of much more advanced on in our understanding of, you know, what we think is right and proportionate, liquidated damage is a bit more difficult. We’d like to understand more about really the, what is the proportionality, you know, what is, what are the risks, what are the benefits of actually having liquidated damages provided for, in contracts that we’d like to hear as much evidence on that as we can.

00:30:30 – 00:31:29 – Kyle Murchie

So again, another area of focus for our audience, where as you say, evidence-based information and kind of feeding in on top of what you’ve obviously received before would be really, really valuable. And kind of just thinking about when we’re talking there about GSOPs as well, more generally, so, you know, in our review, GSOPs can definitely be really powerful, but we have noticed that it’s interesting as time goes on, sometimes new processes come into different network operators, different team sort of dynamics, different, you know, just individual changing, and actually maybe that not being quite the forefront as it was historically.

So, you know, putting a GSOP in place is one thing, but what’s the intent to have greater visibility? Like we would, would industry have visibility? Is it going to be more for kind of Ofgem visibility? How will people know if GSOPs are kind of being met at an individual case by case level, but also more broadly across the network and the whole?

00:31:30 – 00:34:07 – Alasdair MacMillan

Yeah, so I mean, I guess just to, I mean, certainly my main experience of GSOPs has been on the retail side. So, I guess just to sort of give some context as what we’re talking about here. So that might be, for example, if you are, if you try and switch supplier and your new supplier doesn’t switch you within a certain amount of time, which I think is currently now five days, they must pay a payment which is, so it’s the guaranteed standard of performance payment, the GSOP, and I think that’s set about 30 pounds. And it’s sort of set out within, the regulations that payment must be automatically made. So, the, the supplier in that scenario has an obligation to understand if they’ve missed the GSOP and if they haven’t just make the payment automatically. So, the customer doesn’t even need to know the GSOP even exists, they just receive a payment, and they’re told, oh yes, this is something that we’re required to do because we didn’t provide that level of service that the regulations require us to.

It’s a bit murkier, I would say, on the infrastructure side. So, whilst they do currently exist for DNOs against delivery, I think it’s quite opaque and I know that a lot of customers certainly won’t be aware of them and we do understand, I mean, we’re talking about it before we came on air, that you know, there are maybe circumstances within which the DNOs themselves, you know, might not be aware of them and therefore they’re not able to accurately or at all pay them out and then report against them. So what we’re really looking to do here is, you know, if we were to introduce new GSOPs, well, or indeed let’s imagine a world in which we actually didn’t, but we’ve still got this existing set of GSOPs, it’s sort of imperative that it’s understood by both sides, you know, the customer and the network company that they exist. And what we want to see is network companies are taking them seriously, automatically paying them out and then reporting on them. So, it’s very, that’s the reputational side of this if a, if one particular network company is sort of consistently missing GSOP deadlines, we want it to be transparent that that’s the case and then they’ve made those payments, so we’ll be looking at ways, and it, again, it’s set out in the consultation of how to ensure, I guess performance against GSOPs is appropriately transparently reported, such that, you know, it’s visible as to how the network company’s performing.

00:34:08 – 00:34:17 – Kyle Murchie

Yeah, and that transparency, even putting aside the financial implication and penalty is also really helpful because no network wants to be at the bottom of any table.

00:34:18 – 00:34:19 – Alasdair MacMillan

No, right exactly, yeah.

00:34:19 – 00:34:20 – Kyle Murchir

So, it’s got that aspect as well.

00:34:20 – 00:34:21 –Alasdair MacMillan

Definitely.

00:34:21 – 00:36:15 – Kyle Murchie

Okay, I think probably on the same theme, if we just stick going from kind of theme three to theme five now, and we’ll come back to, to four in a minute on that kind of ambition of connection offers because that’s another really meaty one.

You know, you set, you said right okay, we’re going to have GSOPs and kind of making sure that connection dates are met, and we’ve also talked about milestones before. But then to prevent any network going, okay, well let’s set out, you know, five years in addition to what you could potentially achieve; you then obviously got this ambition of connection offers and we were really, you know, we had been quite keen to see something that, you know, maybe set something along the lines of a range or having just more information at the time of getting an offer, you know even well, DNO level offers rarely come with a date when you actually get your offer out, TO connected projects obviously do, but it’s often in April or October.

And we know that you’re not going to get all those connections made in either of those two months, so it’d be, it would be good to kind of chat through what you’ve proposed there, because the sounds of it you are, you’re absolutely talking about a window and some sort of kind of best case date and then a kind of what a backstop date, for a lot of our listeners, there are backstop dates already in TO you know, connect projects, but really that there’s no implication if the network was to go beyond that particular point, you know, if it was NESO or the, or the TO, so what would be good is a window where you’ve talked about more penalties around that GSOPs kind of helping to, to maintain that. But maybe a window that what can be set on day one and then maybe be reduced as time goes on, is that the?

00:36:16 – 00:39:56 – Alasdair MacMillan

Yeah. Again, this is quite a kind of early-stage proposal that we’d like to hear more about in terms of its feasibility, and I should say that, you know, this is absolutely not something that’s, you know, being proposed to go into T3, for example. What T3 has on the connection side, you know, as set out in the FDs last week, or earlier this week I should say, that was last week, sorry, is there is a sort of delivery incentive where, you know, TOs are rewarded for delivering to a date and then they’re penalized or they don’t earn if they don’t.

So, this is that’s absolutely what’s, you know, in final determinations. This is sort of idea that, you know, potentially might have legs in, who knows, in maybe ED3 or is something to think about for the future, but it’s really a way of marrying the sort of requirement on them to meet connection dates, which is three, and then incentivizing ambition, which is five. And this won’t be something that, you know, all projects are interested in necessarily, you know, we often hear that you know, a project might not want an ambitious offer, They might want a realistic offer, they want an offer that they can, or a date that they can, they can know for sure that the network company will meet and that that obviously benefits them.

But there are other projects where they would benefit from maybe the TO or the DNO being more ambitious. So, you know, is there a way to effectively sort of hold them to account at the backend? So maybe you’d have a backstop date that this, for example, a penalty against, and then you could have an ambitious date that’s ahead of that, that they could potentially then be rewarded against delivering, and then you’ve then got a sort of window within which and there’s different ways you can design this, but in this scenario, it would be a window within which there is, there’s sort of no penalty and there’s no reward. And that obviously encourages them to be ambitious where they can be.

There’s various issues with not issues; I guess policy points that we need to work through. So, you know, currently you’ve got a sort of milestone framework and a security framework that’s backdated off the, the actual date and the agreement. If we haven’t got a date here, we’ve got a range then how do you, how do you sort of back calculate those things, that’s something that would need to be worked through. But we think, you know, something we’d like to hear more about, you know, is this a concept that could work, what are the potentially sticky issues with it and ultimately, you know, as a developer, would it, would you see, do you think you’d get a better outcome if this was the, if this is what the network company were required to deliver you?

And you know, this sort of, there’s another side to this as well, which is then the point you made around transparency of information. So, you as a connecting customer, particularly if you’re not somebody who’s particularly experienced with managing the process, you might see your connection date and then, you know, with humans you see a date, you assume that’s what they’re working towards. In reality, there’s so much uncertainty that it would be, it’d be more sort of appropriate for the offer stage and even throughout the process for it, for it to be a range that’s communicated to the customer. So, they’re clear that actually it’s not going to be the 1st of April or the 1st of October. It’s going to be somewhere within this, you know, few months for example, period.

00:39:57 – 00:41:36 – Kyle Murchie

Yeah and it’s interesting from our perspective from a transmission connection, you know, it could be, you know, even on day one if that was as big as a year, two years, you know, sounds a lot, but if that connection’s going to be made seven, eight years in the future, then actually having some sort of window where, you know, the worst case solution, the best case, and you know, it is interesting because we were talking about this obviously earlier as well, around there are a lot of developers who haven’t gone through this experience of a connection yet and will be doing over the, the coming years and you know, we often see transmission connections, you know, Mod App, many times before they actually, they actually energize, you know, six to 10 times to change a date is, is quite possible. And that can be driven sometimes by NESO, and so that can be driven by the TO, it could be driven by the developer; there’s so many permutations, try to get outages aligned when you’re in the thick of it, you know, finalizing your commissioning or issues happening on site.

So, yeah, we don’t want a world, of course, where there’s a fixed date and everybody gets a penalty either way – that doesn’t work. There has to be, an ability to, to flex and, and appreciate that time does change. But then maybe as time goes on, then that does become narrow and as you say, maybe it is a couple of months where you go, well, you know, we’re only a few months away from energisation; It’s either going to be March, or out to July, but we’re not going to go any further beyond that. So, it sounds like there’s quite a few different ways to approach that, but we can maybe yeah and others feed into the, into the consultation to help develop that concept.

00:41:37 – 00:42:35 – Alasdair MacMillan

Yeah, no, definitely. And the dynamic point is a good one. So, you know, there is obviously, you know, the most uncertainty in theory that should exist, we’ll be at the offer stage and as you then move through the process, you know, which in some cases is, is a number of years, then, you know, as each year, as each year passes, the uncertainty envelope should be reducing. So the range that they can be communicated back to the customer is never reducing one. So again, just back to the point, you know, you get a better-informed customer with more reasonable expectations, and then you have a I guess a more informed range against which the network company could be either then penalized against the backstop or incentivized against the front end. And so, it keeps them, it, I guess it just kind of keeps that signal always in play of, you know, if you do well here, you’re rewarded, if you don’t, then you’re penalised.

00:42:36 – 00:43:27 – Kyle Murchie

And for the networks that are listening, I mean, I would certainly say that you know, not being in T3 in the FDs shouldn’t a barrier, you know, it might not be that something with a backstop that’s got penalties and GSOPs associated with it, that might take obviously longer, but there’s no reason why a network couldn’t provide a range from now effectively, you know, that sort of information and I suppose just accuracy of information  is really key. Because you know, if you took what was the tech register before the reordering of the queue, everybody knows that those dates on there, you know, there’s many dates in the past, so how can we get to a phase where, you know, we maybe have dates that you need from many contractual reasons, but can we have that kind of a continuous update on, or regular update on date ranges?

00:43:28 – 00:43:31 – Alasdair MacMillan

Yeah, which is maybe a segway into theme four, is that your intention?

00:43:32 – 00:44:01 – Kyle Murchie

Yes. Yes, I was, so I’ve called it out but yeah, you know theme four and the quality of connection offers, obviously really topical now and I think a lot of people will be really keen to understand, okay, how much of this is something that will be in place before Gate 2 offers come out? How much of that won’t be, and it’ll have to come in later? And, even if it’s not fully in, you know, a license condition, what could be, you know, what’s the messaging out to the networks on quality?

00:44:02 – 00:46:27 – Alasdair MacMillan

Yeah. I should say again, I mean this is, it’s another example of where, you know, there are examples with network companies of them doing kind of good work on this point. And you know, as everyone want to sort of call that out, the what this is about is ensuring that the customer is an informed customer and when they receive, you know, an offer or any associated documentation that might come throughout the process, you know, it’s communicated to them in a way that’s clear, transparent, understandable; you know, they understand what they’re reading in the same way that we always talk about on the retail side of Ofgem, the importance; how important it’s that a consumer, an uninformed consumer, can understand their bill, you know, can understand, correspondence they get their supplier. This is sort of doing the same thing really, or looking through the same thing for connecting customers, and I think there are things we can do with the regulatory framework, be it through a principles based license condition or something more prescriptive or both, around sort of increasing the requirement for offers to be communicated in a certain way and to contain certain information presented in a certain way. Obviously, we’re at the situation now where, just moving back to the process reform side, we’re going to start seeing Gate 2 offers coming out in a number of phases over the coming months, clearly regulatory requirements like this, and we are consulting at this stage take sometimes implement. But I guess, you know, networks have, have, again, there’s good examples of them, you know, seeing a direction of travel into a sort of future regulator requirement, be it something that’s potentially coming into in a future price control, for example, and actually kind of acting now to prepare for that.

So, what we’d really, the, the message really to networks is you know, don’t wait for the new requirement to come into place. Do what you, you can see where we’re going with this; so, you kind of do what you can now to, to prepare for that and, improve standards of service for connecting customers when it comes to quality of offering information now ahead of any regulator requirement coming into play, which, you know, for some phases of Gate 2 to whole queue, you know, it might come too late for, yeah.

00:46:28 – 00:47:14 Kyle Murchie

And certainly there’s going to be enough offers coming out that we’ll definitely get lots of feedback, on those, and it’ll be really interesting to see particularly the areas where, you know, because when we talk about quality, obviously quality is such a broad area and, and topic, whether it’s, you know, visibility of information and whether it’s accuracy of, of data through to kind of silly mistakes, but silly mistakes in a contractual document like a BCA, you know, you can’t sign something if it’s in the wrong person’s name, for example. So hopefully, we’ll see how that develops, but yeah, great that that ask is, is there of networks to think about that now, noting that there’s a kind of a direction of travel published.

00:47:15 – 00:47:25 – Alasdair MacMillan

Yeah, and I mean, you already called the link out there as well, you know, back to theme five. And I just want to make the point again, I mean, for those that that do read the, you know, the consultation.

00:47:25 – Kyle Murchie

Everyone will read it!

00:47:26 – 00:47:57 – Alasdair MacMillan

Or at least a five-minute read, the AI will give you. You know, we really do see themes three, four, and five as a package. So, you talk about, you know, requirement to meet a connection date, the ambition of that connection date and the quality of the information, I guess, associated with that date that the customer will receive. Three, four, and five are effectively a package that are seeking to improve standards of service across the whole piece, and, you know, we see them working in tandem with one another.

00:40:20 – 00:40:34 – Kyle Murchie

So it brings us to the end of the kind of the core themes that most of our listeners will be most interested in. There are a couple of other things though – themes six and seven. Do you want to just quickly touch on them and the kind of high-level points?

00:40:34 – 00:42:41 – Alasdair MacMillan

Yeah, theme six is quite different – so that is very much at the sort of very low voltage, household level, and what that theme is looking to do is, is to improve standards of service and timeliness, for example a household looking to install a heat pump, or you know driveways that need a loop for EV chargers, for an example. So very much at the kind of domestic, micro-level; building what already exist in terms of the standards of service and the timeliness requirements, which DNOs have to perform certain functions – so that is theme six.

And then theme seven is all about determination. So, this is about really, our role in the process, Ofgem’s role as police if you’d like, or as arbiter. So, we have powers in legislation to determine and publish guidance on what we see our role to be as arbiter of the process; you know where we have a role, the types of cases we can maybe rule on and talking here hypothetically about a disagreement or a dispute between a developer and a regulator party about some element that relates to connections – that guidance was last updated, I think, in 2017. And obviously we are now in a situation where we have a new connections process, you know it’s gated and it’s very different from the old world. So, the nature, we expect the nature of things that is to come to us, for potential determination to change. So, theme seven just says what we are going to do about that; so, we are going to go and consult on changing the guidance, and also there are some things in there about what we would like networks to do about their dispute resolution processes because there are some perlatives that by the time a case comes to us, the developer is exhausted, the process within which ever regulated party are dealing with, so it just kind of helps everybody get a better outcome from the determination process, so that’s what theme seven is about.

00:42:41 –00:43:05 –Kyle Murchie

Great, thanks for the summary, so that brings us to the end of the podcast today, thank you very much Alisdair for joining us. I think we could talk pretty much all day on, many of these themes and get into even more detail, but I think for, for most of our listeners, that’s a really great overview of kind of the key themes that most of them will be really interested in.

I suppose just going back to the consultation, so I suppose the ask is – consultation out now, but it will be open until, was it 27th of February?

00:43:05 – 00:43:06 – Alasdair MacMillan

Yeah, 27th. 27th of February.

00:43:06 – 00:48:43 – Kyle Murchie

Yeah. So, there is time to kind of review that, but as we’ve gone through, there’s really key areas where some evidence-based examples could really support.

00:48:44 – 00:45:00 – Alasdair MacMillan

Definitely, yeah. So, you know, encourage as many people as are listening and, you know, spread the word. Just, we just want to keep building up the evidence base. I mean; I guess just to sort of step back a bit as a a sort of final word. I mean, you know, we, we call this the end-to-end review, we don’t want to anybody to think that this is sort of the end of the process. You know, we obviously had the consultation last year, this is really, I guess, extensively like an update. So, we’re sort of dropping the hammer a period of time and we’re saying, here are some things that we’re going to go and do, here are decisions, here are some things we’re thinking about building on, what we’ve heard here are proposals for further consultation. We then expect to respond to this next year. But in the meantime, you know, we will absolutely be moving ahead with implementing, uh, the decisions that we set out. So, you know, look forward to, to ongoing engagement and spoken to a lot of very keen developers and network companies on this numerous times already. So keen to keep that dialogue open.

And just one more thing I would say, I guess it’s a bit of an elephant in the room, is how does this interact with, you know, T3 and ED3, design processes, it’s obviously, you know, we’ve opened up the books here on the connections process and we’re looking end-to-end customer journey and it’s clear that, you know, some of the things that we’re looking to move ahead with end interact with the price controls, and it just gets to reassure everybody that, you know, the processes are absolutely joined up and, you know, as the fair and reasonable regulator, we wouldn’t be, I guess, introducing anything that creates sort of awkward, you know, double counting or duplication or overlap. So, you know, we absolutely see the outcomes of this process operating in lockstep with, with the price control setting.

00:45:01 – 00:45:05 – Kyle Murchie

Yeah, and similarly at the other end with the Connections Reform process, and the steps that’ll be taken over the coming year.

00:45:06 – 00:45:06 – Alasdair MacMillan

Exactly.

00:45:06 – 00:45:44 – Kyle Murchie

Great. Well, thank you very much, Alisdair, I really appreciate you coming in and, yeah, thanks everyone for listening. We’ll see you in the next one.