Ofgem to review gas and electricity grid charges

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Ofgem is to undertake a comprehensive review of gas and electricity grid charges to ensure that a consistent approach is adopted for both.

Alistair Buchanan, Ofgem’s chief executive, said that the so-called Project TransmiT will consider whether the way in which grid costs are shared between users needs reforming.

As a first step Ofgem will be seeking views on the scope and priorities for the review. Initial proposals will be published in spring 2011 with a decision on taking the proposals forward to follow in the summer.

SNP Westminster Energy spokesperson Mike Weir MP welcomed the project as an opportunity to end the discriminatory transmission charging system which he claims results in Scottish electricity generators paying the highest grid charges in the UK.

Weir said: ’The SNP have been pressing Ofgem to move away from their current charging model for years. I am pleased that they are finally accepting that the present regime is not suitable for the encouragement of low carbon renewable generation given that such generators have little option as to where they can site developments. The present encouragement to site near centres of population is clearly unsuitable.

’Any new system must recognise the need to give a fair deal to developers in Scotland and end the current ludicrous situation where generators in the north pay a £16 per MW to get access to the system, whilst generators in the south of England effectively receive a subsidy.’

Nick Horler, ScottishPower’s chief executive, co-signed a letter to the leaders of all the political parties in the Scottish Parliament in April this year which also highlighted the potential negative impact that the current transmission charges could have on investment in new sources of electricity generation in Scotland, including renewable energy.

Welcoming Ofgem’s review, he said: ’We have been concerned for some time that the current rules on charging for transmission are hindering the UK’s ability to make cost effective progress towards key environmental and energy policy goals.’