---

Energy Bill

moved Amendment No. 21: 21: After Clause 80, insert the following new Clause— ““Electricity distribution ““Charges relating to connections (1) Section 16A of the Electricity Act 1989 (c. 29) (procedure for requiring a connection) is amended as follows. (2) For subsection (3), substitute— ““(3) The person requiring a connection shall also— (a) give the distributor such other information in relation to the required connection as the distributor may reasonably request; and (b) in relation to charges attributable to the costs of giving a notice under subsection (5), pay to the distributor amounts of such description, to such extent, and in such circumstances as may be prescribed by the Authority with the consent of the Secretary of State.”” (3) In subsection (5) for ““any information”” substitute ““anything””.”” The noble Lord said: My Lords, I must begin with an apology to the House that this amendment will not be as entertaining as the previous one. I am tempted to tell one story, but I shall resist the temptation and get straight ahead with my amendment, which deals with an important issue of concern to those who operate electricity networks. If the amendment is accepted—I hope that the Government may feel able to accept it—it would change Section 16A of the Electricity Act 1989 to regularise a current industry practice that has been recognised by Ofgem, the regulator, as reasonable and efficient. The amendment aims to put what are known throughout the industry as assessment and design charges—I shall refer to them as A and D charges—on a proper legal footing. A and D charges are levied up front by distribution network operations—which I shall refer to as DNOs, if the House will forgive me—when managing certain connection requests. The charges cover the costs involved in assessing the impact of a connection request on the distributor’s network and the costs involved in designing the network connection. These costs can run into many thousands of pounds. It is only fair that they should be paid by those seeking connection to the network rather than spread out among all network users. However, there have been a number of complaints. Earlier this year a number of DNOs sought legal advice and were told that the practice of recovering assessment and design costs up front was not permitted under the relevant legislation—most notably, Section 16A of the Electricity Act, which I referred to a moment ago, does not allow for it. The practice was therefore considered to be in breach of the law. The regulator, who had previously approved of up-front A and D charging as a sensible cost-reflective measure, has therefore felt unable to continue to do so. The practice was endorsed in the connection methodology statements of the DNOs which have to be approved by Ofgem under the standard conditions of the electricity distribution licence, but because of this recent legal advice on the issue, Ofgem has now required the DNOs to cease the practice of up-front A&D charging despite the obvious economic justification for it. The industry has come to the conclusion that the only way to put this right is by a legislative provision, and this Bill obviously provides the right place to do that. An amendment to Section 16A of the Electricity Act would simply take us back to the previous position, one which everyone thought existed at the time. Ofgem itself has recommended that the Act should be amended in order to permit the practice, "““when a suitable legislative vehicle becomes available””." The inability the recover up-front A and D charges under the existing statutory scheme for network connections has urgent and material commercial implications for DNOs. We have before us the Energy Bill and I have brought forward this amendment which I hope will put the situation right. All it does is to re-enact paragraph (a) of existing subsection (3) of Section 16A and split it into two paragraphs. Paragraph (a) would simply repeat the substance of existing subsection (3) while paragraph (b) is new and would enable distributors in future to recover A and D charges up front, "““to such extent, and in such circumstances””," as set out in any regulations made by Ofgem with the Secretary of State’s consent. This approach would enable Ofgem to regularise the practice promptly and effectively—and of course there have been and will be further wide public consultations—while at the same time ensuring that consumer interests are protected and that there are no detrimental consequences for the current competitive market in connections work. This is a minor matter, but to those who operate these systems, it is of considerable importance. I beg to move.