Ofgem Consults On The Review Of Interest During Construction For Interconnectors And Offshore Electricity Transmission

On 24 May 2013, Ofgem issued a consultation on the proposed scope and review of a review of interest during construction (IDC) for the offshore transmission and interconnector regulatory regime.

IDC is the allowance for the cost of financing the development and construction of electricity transmission assets. An allowance, in the form of an explicit or implicit rate, is provided for IDC by Ofgem in all three electricity transmission regulatory regimes: offshore transmission, regulated electricity interconnectors and onshore transmission.

Under the offshore transmission regime, for generator build projects, offshore generators are responsible for the development and construction of the transmission assets connecting the generator to the onshore transmission network. These transmission assets are then transferred to an Offshore Transmission Owner (OFTO) selected through a competitive tender exercise to operate those assets. Ofgem determines the transfer value that is paid by the OFTO to the offshore generators based on Ofgem's assessment of the costs of the completed offshore transmission assets that ought to have been economically and efficiently incurred. A component of the determined transfer value is IDC. Ofgem is now reviewing its approach for calculating and setting IDC for generator build projects.

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