Citizens Advice response to Ofgem’s DCC review: Phase 1 consultation
Citizens Advice response to Ofgem’s DCC review: Phase 1 consultation 228 KB
We welcome the opportunity to reply to this consultation regarding the future regulatory regime for the Data Communications Company (DCC). We have approached this consultation from the perspective of how the DCC could best deliver value-for-money and a reliable service for current and future consumers. We would welcome the opportunity to discuss our response with you further.
Option B should form the basis of the regulatory design framework for the DCC. It has the potential to drive decisions that are in the interests of consumers for the following reasons:
Direct influence of consumer interest groups on the stakeholder-controlled board would better align the strategic direction of DCC with consumer needs.
Greater transparency over budget-setting and contract procurement will enable better accountability over whether services have been delivered at efficient costs.
In our view the price control framework set out under Option A will still face challenges given the nature of the DCC as an organisation. As an asset light business, there will be limits to what can be done with financial incentives/penalties. We note that similar challenges have been encountered with the ESO.
In order to ensure Option B does deliver for consumers, there are key elements required in the design:
It is vital that the composition of any board includes direct representation of the consumer interest.
We do not agree that DCC users alone can advocate for what is best in the interests of consumers, as user interests cannot be assumed to align with consumer interests. For example, we do not believe users will have a strong commercial incentive to ensure costs are managed effectively. As costs will be the same across all suppliers (on a per customer basis), a competitive market will allow these costs to be passed through to customers. This reduces suppliers’ exposure and so incentive.
Ofgem should have appropriate oversight and retain appropriate powers
Ofgem also has a key role in ensuring DCC activities reflect consumers interests, both in ensuring plans are suitable and effective incentives on performance are maintained. Ofgem should be required to formally approve business plans. For example, it will be difficult to balance the interests of current and future consumers. Ofgem approval will mitigate the risk that a user-controlled board focuses only on the delivery of current core services, rather than innovation that may be in the interest of future consumers.
To ensure effective performance incentives, we agree that Ofgem should retain the power to remove directors or sack the Board. Further, Ofgem should ensure that the performance objectives of DCC executive and Board members reflect DCC performance and consumer interests.
Regardless of which model is chosen, we would advocate for this to be pursued on the fastest possible timeframe, and do not see value to consumers in a lengthy licence extension.
If Option A is progressed, we would welcome the move to an ex-Ante framework where possible.