Draft tender regulations for Offshore Electricity Transmission published

United Kingdom

On 25 July Ofgem published draft tender regulations as part of its ongoing consultation process for the development of the new regulatory regime for offshore electricity transmission. This will be of interest to parties wishing to participate in the development of the new regime and to all parties with an interest in the development of offshore wind and offshore electricity transmission.

Since 2005, BERR and Ofgem have been developing the new regime and to date it has been decided that offshore electricity transmission licences will be awarded on a non-exclusive basis and by means of a competitive tender. In January 2008, the Government decided that Ofgem was the most appropriate body to run the tender process.

Draft regulations

The consultation on the draft tender regulations sets out the process for the award of an offshore transmission licence on a competitive basis, both for the transitional (where the offshore generator is already constructing or undertaking steps towards constructing the offshore transmission assets) and enduring regimes (for new projects).

Ofgem’s approach to the draft regulations has been to set out the practicalities to the policy principles outlined in Ofgem’s previous consultation documents, including the consultation published in June 2008. In essence, these state that the tenders will be undertaken over 4 stages with an annual tender process commencing at a fixed point in time. The GB System Operator will have a key role in the process and there are additional arrangements for offshore projects falling under the transitional regime.

The draft regulations set out the main characteristics of the regime, in particular:

  • the pre-conditions for entry into a tender round which a developer will need to meet, including the requirement to notify Ofgem when these have been met;
  • the mechanics of how and when the tender process will commence;
  • the detail processes, such as Ofgem publishing certain information and tender documentation at varying stages of the process and requiring bidders to respond within specified timeframes;
  • the requirement for Ofgem to assess bids in accordance with pre-determined criteria;
  • the process for finalising the grant of Offshore Transmission Owner (OFTO) licences following identification of the preferred bidder;
  • the circumstance when Ofgem may cancel the tender;
  • a requirement for Ofgem to undertake Regulatory Asset Value (RAV) assessments in respect of projects under the transitional regime;
  • the procedures for Ofgem’s recovery of costs for running the tender process.

Views sought

Ofgem is seeking views on whether and how the draft regulations can be amended further, on the legal drafting of the regulations, on views as to whether the regulations have successfully implemented Ofgem’s policy proposals and on issues specifically excluded from the regulations, such as, for example, whether Ofgem should approve bidder consortiums at the outset of a tender.

Next steps

The consultation process on the draft tender regulations closes on 5 September 2008. After a consideration of responses, Ofgem will consider whether further review is necessary and has therefore scheduled a further round of consultation in the autumn.

The tender regulations are expected to be made in advance of ‘Go-Active’ date, which is defined in the June 2008 guidance as “as soon as practicable after commencement “ of the Energy Act 2004. The ‘Go-Live’ date will be one year later.

To access the consultation on the draft tender regulations, please click here.