EBSS is a government policy designed to support domestic customers because of increasing energy costs, and Ofgem has proposed modifications to the electricity distribution licence to facilitate recovery of these policy costs and for DNOs to have obligations to pay the Payment Body.
Changes to Schedule 15 are needed to reflect the introduction of the new EBSS pass-through cost, and changes to Schedules 16-18 are needed to ensure that: (i) the costs are recovered in line with policy intent; and (ii) LDNO margins are not affected.
We understand that BEIS currently have a preference for the Recovery of the EBSS costs to be via domestic customer fixed charges but that it is also possible that this may change given it is part of BEIS’s consultation process.
These costs are not network costs, therefore the EBSS cost-recovery should not signal how user behaviour affects a distribution network. Cost-recovery should promote simplicity and avoid an incentive for customers to avoid costs through inefficient volumetric price signals, which would result in costs increasingly falling on those that cannot avoid them, including the most vulnerable.
Further, the incremental increase in fixed charges will be consistent across all DNOs, where the same would not be true for the incremental change in charges if a volumetric approach was used. A fixed charge approach is transparent, predictable, and aligns with the principles set out in Ofgem’s Targeted Charging Review (TCR) Significant Code Review (SCR): to (i) reduce harmful distortions; (ii) improve fairness; and (iii) is proportionate and practical. However, this Change Proposal has been raised to ensure that both the fixed charge recovery option and the volumetric charge recovery option are fully developed such that either option can be implemented as efficiently as possible, once BEIS have indicated their preference.
The EBSS will apply equally to domestic customers connected to DNO and Licensed Distribution Network Operator (LDNO) networks. All domestic customers should therefore contribute to the recovery of the EBSS costs.
