United Kingdom

The Challenge

The Data and Communications Company (DCC) was formed to coordinate the various parties involved in the smart meter rollout. As a first of its kind company, an ex post price control was adopted to regulate this natural monopoly. However, over time the scope and nature of the DCC’s activities have evolved. With increased emphasis on DCC facilitating switching for consumers using smart meters, the Office of Gas and Electricity Markets (Ofgem) needed to consider which price control approach would best suit these additional responsibilities.

Our Solution

IPA provided economic consultancy support on a call-off basis to support Ofgem’s consideration of the options available to regulate the DCC’s new scope of activities. This included assessing whether or not the baseline arrangement should be extended to switching, or whether a different approach would be more appropriate.

We drew on our sound understanding of the requirements of the Switching Programme, as well as the characteristics of ex post price controls, to:

  • Support Ofgem’s discussions with the DCC;
  • Analyse the appropriate margin for the switching work;
  • Contribute to the development of an incentives regime;
  • Explore relevant cost benchmarking and interrogate data provided by DCC;
  • Assist with drafting consultation documents and directions;
  • Provide insight on the development of price control frameworks for the design, build and testing, and live operation phases; and

Offer ad-hoc analytical support as required by Ofgem.