Increased socialisation of connection costs in the distribution electricity network

Table 11. – Estimated annual cost increase per year for customer bills for socialisation options between 2025 and 2035 calculated for the billing year 2030/31^[1] and decreasing to zero over the life of the assets (40 years expected).

Note,  Forecasts are inherently subject to a range of assumptions and uncertainties, this is especially relevant for costs forecasts which extend out ten years from now.

1. 1. Total reinforcement costs which would be socialised over the period 2025 to 2035, range from a high of £118 million to a low of £93 million under the different proposals, between £11.8 million and £9.3 million per year.
   2. Currently, the options proposed, and their forecast costs relate only to increased socialisation of connection reinforcement costs incurred between 2025 and 2035.  These will be recovered over the 40 year life of the asset.  See Annex 6 – NIE Networks Regulated Asset Base for an explanation of NIE Networks’ RAB and how the socialisation costs are paid by electricity consumers.
   3. The costings in this paper represent the costs of the proposed level of socialisation to 2035.  The effect of the RP7 reinforcements will be reviewed in order to inform the decisions in the next price control period.
   4. Rather than requiring consumers to pay for all the reinforcement up front, the additional reinforcement assets paid for by consumers will be treated like standard network assets and added onto NIE Networks’ RAB and paid for over their lifetime (usually 40 years) to cover depreciation and NIE Networks’ borrowing costs.  The actual effect on consumers’ bills will depend on various factors, such as the level of demand due to the uptake of EVs and heat pumps, cost of materials, inflation and rate of return.   
   5. The total cost to consumers of the £118m of distribution network reinforcements being spread over 40 years (the economic life of the assets) will be approximately £217m (in real terms) under the highest socialisation proposal and current economic values.
   6. NIE Networks has forecast the total and average costs of socialising distribution network reinforcement costs per year to 2035 across different connection boundaries/socialisation options.  In the table below those costs are separated between demand and generation connections (regardless of voltage).

Table 12. – Socialised costs results (Generation and Demand)