Select Language:

What are we doing about Network Losses?

For RIIO-ED1 Ofgem introduced a Losses management mechanism to encourage DNOs to address losses:

  • A Licence obligation to design and operate our networks to ensure that losses are as low as reasonably practicable by putting in place a Losses Strategy.
  • Losses Discretionary Reward aimed at encouraging additional actions to better understand and manage losses.

Losses Strategy

Losses Strategy

In accordance with licence condition 49, we published our Losses Strategy in September 2015 to support our strategic vision of:

“Considering all reasonable measures which can be applied to reduce losses and adopt those measures which provide benefit for customers."

The Strategy sets out our overall intention for loss reduction given what is reasonably practicable, and is based on our current knowledge and ability to manage network losses.  Its processes will continue to evolve to ensure we establish a culture of considering network losses in every major investment decision we undertake. 

It is anticipated that the actions included within our Losses Strategy will lead to carbon savings of circa 24,000 tCO2e and 45,000 tCO2e in SP Distribution and SP Manweb respectively, and reduce the cost of network losses to energy suppliers, and ultimately customers, by around £8m during the RIIO-ED1 period.

Losses Discretionary Reward

Losses Discretionary Reward

Ofgem challenged the UK DNOs to consider whether they are able to go beyond the licence requirement, essentially inviting the DNOs to consider whether:

  • There are additional actions which they could take and are outside the reasonableness test set down as a licence requirement
  • Any actions which they have already defined within their Losses Strategy document fall beyond the reasonableness test.

The LDR is managed in three tranches during ED1:

  • Tranche 1 – submissions made in 2016
  • Tranche 2 – submissions made in 2018
  • Tranche 3 – submissions made in 2020

Click here to see the Ofgem guidance


Our Submission - Tranche 1

Tranche 1 is concerned with "processes and methods which DNOs are exploring and implementing to understand and ultimately better manage losses on their networks". 

The objective of our Tranche 1 submission was to present a number of initiatives which we considered would add long term value for customers, the energy industry and the widest possible group of stakeholders and thus seek funding for these initiatives under the LDR mechanism. (Such initiatives which did not meet the cost benefit analysis test were in general not eligible for funding under the normal RIIO-ED1 mechanism and therefore couldn’t proceed without alternative funding).


Our Submission - Tranche 2

Tranche 2 focuses on the specific outputs produced and actions undertaken to manage losses and shift expectations, it requires both a backward-looking assessment plus a plan for future work.

Our Tranche 2 submission provides a review of the activities undertaken and the associated outputs.  Insights and enhancements to our understanding of measuring predicting and managing losses are also explained; as is the engagement with and contributions from internal and external stakeholders.  This phase will build on the work to date and where appropriate we have refined our current initiatives and introduced new ones.