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Priorities and next steps outlined in DSO regulation

Dan Starman Senior Consultant

Ofgem outlined its position paper on distribution system operation/ operators (DSO) on 6 August, alongside its proposed approach on the next distribution price control (“RIIO-ED2”) process. The paper outlined four strategic outcomes of DSO reform: clear boundaries and effective conflict mitigation effective competition in markets, including balancing and ancillary services neutral tendering of network management and reinforcement requirements, including the provision of a level playing among all solutions, and embedded whole electricity system outcomes. Three workstreams are being progressed to deliver these aims. These are: distribution network operators (DNOs) and new contestable services; key enablers for DSO functions; and development of coordinated markets. Ofgem noted that there are a range of parties that can contribute to delivery of DSO and a range of means in which it could be delivered. As such, it noted that current work seeks to maintain optionality for wider institutional change in the future, while delivering meaningful progress now. Ofgem said its starting position is to extend the use of competition models to meet network and system needs where appropriate. While Ofgem noted that DSO functions continue to evolve, it said it will work with existing and new institutions to ensure they do not absorb DSO functions to the extent they cannot be unbundled in the future. The regulator will monitor progress carefully and consider whether over time there may be a case for greater separation of certain DSO functions from the DNOs. DNO development Ofgem outlined that DNOs must fully support coordinated markets, ensuring ...

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