Despite privatisation and competition, the local energy network remains a natural monopoly. 

Regardless of site location, only one electricity or gas network has pipes or wires in the street.

For this reason, network charges are regulated, and can only be passed on by retailers at cost.

This provides energy networks with largely fixed ongoing revenue stream, with limited ability to improve profit margins.

However, revenue for capital works on new supply projects are one revenue source where pricing is subject to both negotiation,  and a complex policy of cost-sharing.

In the past, new supply projects often attracted an ample cross-subsidy, lowering the up-front fee for supply.  However, over the past 10 years, we have noted a diminishing interest by networks to fund assets that will ultimately become their network.

Therefore, customers who are negotiating for new supply capacity now need to pay careful attention to three key issues :

  1. cost-sharing ratio of capital expenditure
  2. minimum capacity or demand levels
  3. take-or-pay obligations
  4. contract term

As these items play a significant role in the value and term of ongoing energy charges, they have the potential to inflate energy costs well beyond reasonable levels.

For this reason we offer our expertise in managing the negotiation with network monopolies to reduce your capital and ongoing energy costs.

Network Contract Negotiation