Losses Incentive Mechanism

Electrical losses are an inevitable consequence of transferring electricity across the distribution network and they have a significant financial and environmental impact on consumers. For example they contribute to approximately 1.5 per cent of Great Britain’s greenhouse gas emissions.

To encourage distribution network areas to manage an efficient level of losses on their network, Ofgem introduced a losses incentive mechanism as part of our electricity distribution price control.

Owing to volatility with data used to measure losses, for the current price control we have replaced the losses incentive mechanism with a reporting requirement. For the next price control (from 2015) we are introducing a losses reduction mechanism consisting of four components: licence obligation, loss reduction expenditure in the business plans, annual reporting and discretionary reward.

Publications and updates

  • Published: 15th Dec 2011
  • Open letters and correspondence
  • 1 Associated documents
This letter sets out Ofgem’s intended approach to handling the PPL term for Regulatory years 2012-13, 2013-14 and 2014-15 in the context of the Distribution Price Control Review 5 losses incentive mechanism.

  • Published: 24th Oct 2011
  • Closed: 6th Jan 2012
  • Consultations and responses
  • 1 Associated documents
Due to the complexity of this matter, the need to give careful consideration to the responses received and the fact that the closing date for responses had to be extended, publication of the decision on this consultation has been delayed.

  • Published: 29th Jul 2011
  • Decisions
  • 1 Associated documents
Interim decision on Electricity North West Ltd’s application for restatement of 2009-10 distribution losses to account for gross volume correction and other data issues, prior to consultation on the methodology.

  • Published: 24th May 2011
  • Closed: 10th Jun 2011
  • Consultations and responses
  • 7 Associated documents
This letter sets out the main issues and next steps. It contains information on responses received to the consultation, dealing with the interactions between the electricity distribution losses incentive scheme and Gross Volume Correction activity

  • Published: 21st Mar 2011
  • Closed: 2nd May 2011
  • Consultations and responses
  • 13 Associated documents
Consultation on the interactions between the electricity distribution losses incentive scheme and Gross Volume Correction activity.

  • Published: 17th Dec 2010
  • Decisions
  • 1 Associated documents
This letter gives the Authority’s decision to allow the two Distribution Network Operators in the CE Electric UK group to calculate and report their distribution losses for regulatory year 2009-10 on a basis that differs from that used for 2002-03.

  • Published: 14th Dec 2010
  • Decisions
  • 1 Associated documents
This letter sets out the Authority’s decision on measures to address the effects of gross volume corrections in settlements data which have adversely affected losses incentive reporting for some Distribution Network Operators.

  • Published: 2nd Aug 2010
  • Factsheets
  • 1 Associated documents
Basic information on electricity units distributed and loss percentages for the fourteen distribution network operators (DNOs) with distribution services areas.

  • Published: 20th Jul 2010
  • Closed: 31st Aug 2010
  • Consultations and responses
  • 7 Associated documents
This consultation sets out issues raised by two electricity distributors on gross volume corrections in settlements and their possible effect on revenue levels.

  • Published: 18th Jun 2010
  • Decisions
  • 2 Associated documents
Notice pursuant to Section 11A of the Electricity Act 1989.

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