Tackling electricity theft – the way forward

Executive Summary
Theft of electricity increases prices for customers and reduces safety. It leads to misallocation of costs among suppliers, which can distort competition and hamper the efficient functioning of the market. It also has links to organised crime, in particular cannabis cultivation. We consider that existing statutory duties, licence conditions and industry code requirements are insufficient to ensure that electricity suppliers or Distribution Network Operators (DNOs) undertake sufficient activity to detect and deter electricity theft and protect honest consumers from harm arising from theft. We consider that our role in this context is to facilitate the development of effective arrangements to tackle energy theft. In July 2013 we consulted on proposals to develop new arrangements for tackling electricity theft that mirrored the regulatory framework implemented in the gas sector in 2013. Final proposals We received 21 responses to our July 2013 consultation. In light of the positive responses received, we have concluded that the proposed changes to the current regulatory framework should be made to help ensure that the regulatory arrangements are in the best interests of consumers. We confirm our electricity theft policy is based on the following changes: We are introducing new licence conditions for electricity suppliers to strengthen their obligations to investigate, detect and prevent theft We are consulting on establishing a Theft Risk Assessment Service to facilitate industry actions to tackle theft. This would be introduced through a Direction by the Authority to all electricity supply licence holders. We are setting out principles industry should consider to implement incentive measures to support suppliers in their activities to tackle theft. Such incentive measures would need to be introduced by industry code modifications which then come to the Authority for approval. We are setting out our approach to new obligations for DNOs to tackle theft in circumstances where it is not the responsibility of suppliers. These will be developed through the RIIO ED-1 licence drafting process. Next steps This document includes: A Statutory Consultation on a proposed modification to the electricity supply standard licence condition. Please respond by 2 April 2014. A consultation on a draft direction to require suppliers to set up, in accordance with the new licence condition, a central Theft Risk Assessment Service. Again, please respond by 2 April 2014. Principles we expect the industry to adopt when considering incentives through the code-modification governance process Additional measures to tackle theft, including keeping the Revenue Protection Code of Practice on Theft Investigations updated. Tackling Electricity Theft – The way forward 5 Subject to consultation responses, we aim to introduce the new licence obligations by summer 2014. We would then expect the incentive scheme to be up and running by early 2015 and the Theft Risk Assessment Service to be operational by 31 March 2015.[OFGEM]