Increased socialisation of connection costs in the distribution electricity network

The current connection charging policy for the distribution network here, is to charge customers seeking a new connection to the distribution network for the cost of any reinforcement to the network triggered by their connection request, as well as the cost of the lines and plant directly needed to make the connection.   

However, changes in our electricity networks and the way we use them have made the current policy unfair to some users and restrictive to our path forward.  For example, NIE Networks is currently undertaking the largest upgrade in our network history, through its RP7 price control.  But RP7 will take six years to deliver, and more work may be needed after that.  Some customers connecting to the network in areas which the RP7 upgrade has not yet reached, face potentially higher charges than those in other areas.  In these areas the first customer to request a connection will be required to pay for the upgrades, which can then be used by subsequent customers seeking a connection, but who may not contribute to the cost of the upgrade.  This is known as “first mover disadvantage”.  The proposals in this paper will help remove the unfairness of this “first mover disadvantage”.

In addition, stakeholders say that charging for the reinforcement works is a barrier to connecting more renewable generation and to consumers installing Low Carbon Technologies such as heat pumps and Electric Vehicles (EVs).

Moving to a policy of greater socialisation, which allocates more of the distribution reinforcement to general network costs, is likely to remove the unfairness noted above and facilitate more renewable generation here, and more adoption of such things as heat pumps, electric vehicles and renewables as part of our transition to a more sustainable, fair and secure energy system.  It will help make the region a more attractive investment destination, and more competitive with neighbouring jurisdictions which already socialise more of their distribution reinforcement costs to general network costs.  

This consultation puts forward a number of options for increasing the level of distribution reinforcement which is charged to general network costs.  It sets out the benefits and likely costs of each option.  The options have been developed drawing on experience from our near neighbours.  The options set out which costs will still fall to customers seeking a new connection and discuss the use of a “High-Cost Cap” to ensure consumers do not pay for excessive reinforcement of the network because of individuals seeking a difficult or remote connection to the grid.

This policy proposal is consistent with the Minister for the Economy’s statement in the Assembly on 29 April 2024 that he intends to introduce further socialisation of grid connection costs.  The Minister noted that the further socialisation of connection costs is an important step in removing the high-cost barrier to the mass adoption of heat pumps and electric vehicles.  It creates an opportunity for businesses to decarbonise and is a key enabler in meeting our net zero targets.

The Department’s preferred policy option is Option 4, full socialisation of network reinforcement costs for customers connecting to the distribution network.  This would apply to both homes and business requesting connections for such things as heat pumps, or other electricity demanded and to renewable generators seeking a connection to the electricity distribution network. 

This consultation builds on the joint Call for Evidence^[1] which the Department published with the Utility Regulator (UR) in July 2023.  

The Department has worked with UR to develop the options put forward in this consultation and will work with UR to review the responses and develop the path forward.