CMP344 Connection and Use of System Code (CUSC) proposed changes

What changed

Ofgem rejected CUSC modification CMP344 on 1 May 2026. The proposal would have removed offshore generators' liability for Income Adjusting Event costs on their Offshore Transmission Owner assets and shifted those costs onto demand consumers via the Transmission Demand Residual (TDR) charge. The rejection applies to IAEs on both existing and future OFTOs. The status quo is preserved: generators connected to OFTO assets remain liable for IAE costs arising on those assets.

What this means in practice

An Income Adjusting Event is a cost or revenue change that falls outside the assumptions built into an OFTO's original revenue stream. These can arise from regulatory changes, force majeure, or other events that alter the cost base of the offshore transmission asset after the OFTO licence was awarded. Under the current arrangements, the generator connected to the OFTO bears these costs because the OFTO revenue stream, and therefore the charges that recover it, are tied to the generator's connection agreement.

CMP344 argued that IAE costs should be socialised across all demand users through the TDR, on the basis that offshore transmission is part of the wider transmission system and its costs should be shared accordingly. Ofgem disagreed.

The rejection is correct on cost-causation grounds. Offshore generators chose to connect via OFTOs. The OFTO regime exists specifically to fund the transmission assets that serve those generators. IAE costs arise on those assets because those assets exist to serve those generators. Shifting the costs to demand would break the link between connection choice and cost consequence, creating a cross-subsidy from onshore consumers to offshore wind operators.

The practical effect is straightforward. Offshore wind farms connected to OFTOs will continue to face the full cost of IAEs on their transmission assets. This preserves the incentive for generators to manage and mitigate risks on their OFTO connections rather than treating them as someone else's problem. For demand consumers, the TDR will not increase as a result of offshore IAE costs being loaded onto it.

The amounts involved are not trivial. OFTO IAEs can run to tens of millions of pounds across the portfolio, particularly where asset defects or regulatory changes affect multiple OFTOs simultaneously. Had CMP344 been approved, these costs would have been spread across all demand users, a diffuse charge that no individual consumer would notice but that in aggregate would represent a transfer from onshore bill-payers to offshore generators. This is exactly the kind of cost socialisation that erodes the integrity of the charging framework: individually small, collectively significant, and invisible to those who pay.

What happens next

The decision is final. CMP344 is rejected and there is no further consultation or implementation process.

However, the underlying tension has not gone away. The OFTO regime was designed for a world of point-to-point radial connections from offshore wind farms to the onshore grid. As the offshore network evolves towards a more meshed, multi-purpose transmission system, particularly with the development of a coordinated offshore grid and multi-purpose interconnectors, the question of who bears transmission risk offshore will return. A radial OFTO serving one wind farm has a clear cost-causer. A meshed offshore network serving multiple generators, interconnectors, and potentially demand connections does not.

Three related developments to watch:

1. Offshore Coordination. NESO's work on a coordinated offshore grid design will eventually require a new charging and risk-allocation framework for multi-user offshore assets. The current OFTO model, where one generator bears the costs of one set of assets, does not scale to shared infrastructure.

2. OFTO Tender Round developments. Ofgem's ongoing OFTO regime includes periodic reviews of how revenue streams and risk allocation work. Future tender rounds may revisit how IAE risk is priced into OFTO bids, which affects what generators ultimately pay.

3. TNUoS charging reform. Ofgem's broader work on transmission charging methodology, including the treatment of the demand residual, continues separately. CMP344's rejection reinforces that the TDR should not become a dumping ground for costs that have identifiable causers, but pressure to use it that way will persist as offshore costs grow.

The decision is a small but useful data point on Ofgem's current thinking: cost-causation still matters, and the regulator is not yet willing to socialise offshore-specific costs onto demand. That principle will be tested harder as offshore transmission becomes more complex and the sums involved grow larger.