The existing model assumes that power flows from an actively managed high-voltage transmission network to passive low-voltage distribution networks, via a large number of grid supply points. It has been tested since the creation of a single system for Great Britain this year, because Scotland had different definitions of transmission and distribution networks.
Temporary arrangements have been put in place for three years. Ofgem hopes to use this time to develop a more flexible system. Possible issues which need to be accommodated include:
OFGEM is seeking new charging and contracting arrangements that would be transparent and provide the right market signals. For example, it wants to promote a distance component so that new generators would be located as close as possible to the demand.
The regulator offers nine proposals, from "no change" to introducing new independent distribution operators which would provide active management services for local networks. It aims to produce a second discussion document in early 2006.