Costing and pricing of electricity distribution services

Costing and pricing of the network service is an important aspect of owning and operating a distribution “wires” system in the deregulated England and Wales electricity supply industry. At a time of relative stability in the five-year regulatory price control cycle and with the structure of electricity distribution charges attracting regulatory interest, now may be an appropriate time to examine current practices and to consider the increasingly important relationship between distribution costs, performance and price. This article describes the current costing and pricing methodology, from both a distributor and a user perspective, before briefly discussing how these might develop as regulatory emphasis begins to change from one that is asset based to a regime that focuses more on customer driven network performance.