Connection Charging Methodology (Distribution)

What it is: The framework governing the upfront capital costs paid by customers connecting to the local electricity distribution network in Great Britain. Governed by DCUSA Schedule 22 (the Common Connection Charging Methodology, CCCM). Reformed fundamentally from 1 April 2023 by the Access SCR.

Primary source: sources/neso/connection-charging-methodology-dx.md Legal basis: Distribution Licence SLC 13B; DCUSA Schedule 22; Electricity (Connection Charges) Regulations 2002/2017

What distribution connection charges cover

When a new customer - a house, a factory, a solar farm, a battery storage site, an EV charging hub - connects to the distribution network, the Distribution Network Operator (DNO) must build the physical link from its network to the customer's meter. Connection charges pay for this work.

The core asset classification is:

• Sole-use extension assets: the cable, switchgear, and transformer installed exclusively for that customer. These are always paid by the connectee.
• Shared network assets (reinforcement): upgrades to the existing network that the new connection requires - replacing a full cable, upgrading a substation. Who pays for reinforcement is the key contested question, and the answer changed substantially in 2023.

Connection charges are distinct from DUoS (Distribution Use of System) charges. DUoS is a recurring annual tariff. Connection charges are one-off upfront payments.

Deep to shallow: the Access SCR reform (April 2023)

Prior to April 2023, all distribution customers faced a "shallowish" connection boundary. The connectee paid for their sole-use extension assets plus a contribution toward reinforcement at their connection voltage level and one voltage level above. This could add substantial upfront costs in congested network areas.

The Access and Forward-Looking Charges Significant Code Review (Access SCR) changed this from 1 April 2023, via five DCUSA modifications (DCP404-407):

Demand connections (shallow boundary): Demand customers now pay only for their sole-use extension assets. No reinforcement contribution, except where reinforcement costs exceed the High-Cost Project (HCP) Threshold of £1,720 per kVA. Above that cap, the customer pays the excess. Below it, the DNO absorbs the reinforcement cost - recovered through DUoS from all network users.

Generation and storage connections (reduced shallowish): Generation customers still contribute to reinforcement, but now only at the connection voltage level - not one level up. The generation High-Cost Cap is £200 per kW. Storage is treated identically to generation.

Speculative developments retain a stricter treatment, with reinforcement liability at both voltage levels.

The financial transfer is significant - roughly £2 billion per year in cost shifted from connection charges to DUoS. Ofgem funded the transition via approximately £439 million of RIIO-ED2 allowances for the first two years.

Competition in connections (ICPs)

Not all connection work has to be done by the DNO. The regime distinguishes:

Contestable works - design, civil works, cable laying, installation of sole-use assets - can be carried out by an Independent Connection Provider (ICP) accredited by the Energy Networks Association. The customer chooses whether to use the DNO or a competing ICP. ICPs typically offer faster delivery and sometimes lower cost for contestable elements.

Non-contestable works - final energisation, protection settings on the shared network, reinforcement of existing DNO assets - can only be carried out by the incumbent DNO at regulated rates.

The Electricity (Connection Charges) Regulations 2017 extended the second-comer recovery regime to cover connections built by ICPs, ensuring first movers can recover costs when later customers benefit from infrastructure they funded.

How it differs from transmission connection charging

The transmission regime remains deep: large generators connecting at transmission voltage (typically above 132 kV) pay for all sole-use assets and all reinforcement triggered by their connection. This is a significant structural difference. The Access SCR applied only to distribution; there is no equivalent shallow boundary at transmission.

Impact on distributed generation and storage economics

The Access SCR shallow boundary materially improved the business case for distributed generation and storage in network-constrained areas. Previously, a battery storage or solar farm seeking connection in a congested distribution zone faced unpredictable reinforcement charges that could run to millions of pounds - a barrier that concentrated development in already well-served network areas.

Post-reform, the upfront connection cost is limited to sole-use extension assets (plus any excess above the £200/kW HCC for generation). This reduces project capital requirements and removes a major source of cost uncertainty at the development stage.

The trade-off is that all DNO customers bear marginally higher DUoS charges as reinforcement costs shift into the regulated revenue base. Ofgem judged this trade-off acceptable given the pace of electrification required for net zero. The watt-logic analysis (June 2022) noted a structural risk: the Access SCR calls for DNOs to invest anticipatorily, but RIIO-ED2 uncertainty mechanisms may not respond quickly enough to emerging local pressure, particularly from EV charging clusters.

Key figures

See also

• DUoS Charging Methodology - the ongoing network charge that now absorbs reinforcement costs post-Access SCR
• TNUoS Charging Methodology - transmission equivalent (deep boundary, different structure)
• instruments.md row 88 (this instrument), row 89 (Access SCR outputs), row 44 (Electricity (Connection Charges) Regulations)