Indemnity Agreements in Electricity Connections
New Supply to Upgrade Electricity at Ministry of Justice Estates as part of the £500m, prison expansion programme
SITUATION
After signing the Connection Agreement, the Client was advised that an additional Indemnity Agreement was required due to the changes to the Connections Regime where the DNO is responsible for the majority of reinforcement costs for the connection, but feels exposed to regulatory requirements that require them to only invest network capacity where there is an immediate requirement Perception was that if the connection request is cancelled by the MoJ, the DNO would have invested in stranded assets & unable to cover the cost through ill payer fees
TASK
To understand why the DNO requested an Indemnity Agreement prior to commencing design and delivery workontheConnection
To look at whether there is a requirement for an Indemnity Agreement and Connection Agreement for electricitycapacityupgrades,
ACTION
ReviewConnectionAgreement&IndemnityAgreement tounderstandtheirrelevanceandcrossreferencewith theConnectionsRegimepublishedbytheRegulator
Research the Government procedures for Indemnity Agreements.Directexperienceofworkingonlegislative governance for the Public Sector & knowing the HM TreasuryprotectionandproceduresforuseofTaxpayers money. MaindrivebeingthattheIndemnityAgreement couldbeseenasa‘blankcheque’
DiscussionwithrepresentativesfromDESNZ&IPA,then meetingwithDNO EscalateddiscussionswiththeDNO GroupBoard&reviewbytheirGeneralCounsel
RESULT
Confirmation that the Indemnity Agreement was not required, and that design and delivery phase could be initiated by the DNO MoJ advised on the process for Indemnity Agreements to be signed by Lord Chancellor, with permission from HM Treasury Action to remove any Indemnity Agreements issued to DNOs by the MoJ Ofgem to review guidance to ensure there can be no misinterpretation of the Connection Regime change
AT A GLANCE
Connection Regime Review Challenges
Delivering Prison Expansion
Electricity Upgrade
Infrastructure Reinforcement
Outcomes
Removal of need for Indemnity Agreement
Indemnity Agreement
Governance with HM Treasury Review by Regulator
Removal of all Indemnity
Agreements recommended Article published by Infrastructure & Projects Authority
SignificantAchievement
Removal of the need for Distribution Network Operators to require Connection & Indemnity Agreements for new connections to the electricity network, means that confidence to the public sector is achieved in knowing that the Connection Agreement is robust enough as a contract for works, This success safeguards the public purse.
