DCC Price Control: November 2026 to March 2028

What this is about

Ofgem is proposing to set the Data Communications Company's allowed revenue upfront for the 17 months from November 2026 to March 2028, rather than reimbursing whatever DCC actually spends. This is the first time Ofgem will have done a full ex-ante assessment of DCC's revenues, and it marks the end of a regulatory arrangement that has been in place since the smart metering programme began in 2013.

DCC runs the centralised, secure communications network that connects smart meters in homes and small businesses to energy suppliers, network operators, and other authorised users. It is a licensed monopoly. Its costs flow through to energy suppliers, who recover them through standing charges on dual-fuel bills. Under the ex-post regime, DCC submitted its costs each year, Ofgem reviewed them for economy and efficiency, and disallowed amounts it judged unreasonable. The incentive to control spend was weak in both directions: DCC carried little downside risk on overspend, and consumers carried most of the burden. Moving to ex-ante means Ofgem sets a Required Revenue number now, and DCC lives within it or absorbs the gap. The shape of that number and the mechanisms that adjust it during the period are what this consultation is really about.

The 17-month period is awkward but deliberate. It aligns DCC's price control with the broader regulatory cycle that Ofgem is building around smart metering and the post-rollout phase, where DCC's role shifts from deployment to long-run operation of the network. Whatever framework is settled here will set the template for the longer price controls that follow.

Options on the table

Ex-ante price control with a Required Revenue allowance

Ofgem proposes to set a single Required Revenue figure for DCC covering November 2026 to March 2028. The figure represents Ofgem's view of the efficient cost of running the smart metering communications network over that period, including operating costs, capital investment, financing, and tax. DCC recovers this revenue from its customers through licensed charges; if its actual spend comes in below the allowance, it keeps the difference (subject to any sharing factor or incentive mechanism Ofgem builds in); if it overspends, its shareholders absorb the loss unless a reopener applies.

The substantive parameters being consulted on are the level of the allowance, the cost categories it covers, and the in-period adjustment mechanisms. The level matters most. Set it generously and the move from ex-post to ex-ante changes the accounting label but not the cash flows: DCC continues to spend at roughly the trajectory it would have under the old regime, and consumers pay through. Set it tight, with a credible baseline derived from benchmarking and a granular review of headcount, contract costs, and capital programme, and DCC's owners face real pressure to deliver efficiencies or wear the cost. The split of cost categories also matters: anything Ofgem carves out as a pass-through or uncertainty mechanism is, in practice, still ex-post. Anything inside the cap is genuinely at risk.

Winners under a tight, well-designed ex-ante settlement are energy suppliers (whose DCC charges become more predictable and, over time, lower) and consumers (who pay those charges through standing charges on dual-fuel bills). Losers are DCC's shareholders, who lose the asymmetric upside of cost-plus economics, and any incumbent contractors whose margins were embedded in DCC's spend profile. Under a loose settlement, the distribution is reversed: DCC and its supply chain hold their position, and the policy change is cosmetic.

The economic logic for moving in this direction is straightforward. A monopoly facing cost-plus regulation has no reason to push back against its own suppliers, scrutinise its own headcount, or sequence capital tightly. The Averch-Johnson incentive to overinvest is well documented, and the British smart metering programme has produced more than its share of evidence for it. Ex-ante regulation puts cost-overrun risk where it can actually influence behaviour, which is on the entity that does the spending. Whether this particular determination delivers that result depends on the numbers, and the numbers are in the draft determination PDF rather than the consultation summary.

Questions being asked

The consultation document asks for responses on each question raised throughout the determination. The headline themes, drawn from the consultation framing, are below. The detailed sub-questions sit inside the 1.07MB determination PDF and need to be read in full before drafting a response.

Required Revenue level

- Are Ofgem's proposed cost allowances for DCC over November 2026 to March 2028 set at the right level? - Which cost categories are over- or under-stated in the draft determination? [In practice this is where the response should focus most analytical effort: line-by-line scrutiny of operating costs, capital programme, contractor margins, and overheads, with comparisons to DCC's historic outturn and to comparable monopoly operators.] - Is the proposed allocation between operating expenditure, capital expenditure, and financing costs appropriate? [Watch for cost categories that have migrated between buckets in ways that change the effective incentive: capex that should be opex, opex that should be sat outside the cap.]

Ex-ante framework design

- Is the move from ex-post to ex-ante appropriate for DCC's risk profile and cost base? [The honest answer for most respondents will be yes, with the caveat that the framework only works if the allowance is credible and the incentive mechanism has teeth.] - What in-period adjustment or reopener mechanisms are needed? [The trap here is that every reopener is a hole in the ex-ante cap. The right answer is reopeners only for events that are genuinely outside DCC's control and material in scale, with high thresholds for triggering them.] - How should pass-through costs be defined and what should sit outside the cap? [Same principle: minimise the pass-through perimeter, otherwise the ex-ante settlement is ex-ante in name only.]

Incentives and sharing factors

- What efficiency incentive mechanism should apply within the period? [Symmetric sharing factors on under- and overspend, set high enough to matter but not so high that DCC defers necessary investment to game the metric.] - How should performance against the allowance be measured and reported? - Should there be a return adjustment for cost performance, service performance, or both?

Service quality and outputs

- What outputs and service levels should DCC be required to deliver for the Required Revenue? - How should service failures be reflected in revenue adjustments? [The point of ex-ante regulation is to discipline cost and quality together. A tight cost cap with no quality floor produces a degraded network; a quality floor with no cost cap reproduces the current problem.]

Transition from ex-post to ex-ante

- How should any legacy costs from the ex-post regime be treated in the new framework? - Are there transition risks that warrant specific handling in this first price control period?

The draft determination will contain specific question numbers that respondents are expected to reference. Anyone drafting a substantive response should pull the question list from the PDF and answer in the order Ofgem has set, rather than rearranging by theme.

How to respond

Deadline: 14 July 2026

Submission: Email to DCCregulation@ofgem.gov.uk

Documents to read first: - Determination of DCC's Required Revenue: November 2026 to April 2028 [PDF, 1.07MB] - the substantive document containing the proposed allowance, methodology, and specific consultation questions

Who Ofgem expects to hear from: DCC itself, energy suppliers and other DCC customers, network operators, smart metering innovators, industry bodies, consumer organisations, and anyone with an interest in smart metering. For suppliers in particular, this is the consultation where the trajectory of DCC charges over the next 17 months and the template for everything after gets set. The cost of not engaging is that the determination is finalised on Ofgem's reading of efficient cost, which historically has been more generous to DCC than to its customers.