The new queue management process: go like the wind or gone with the wind?

The new quick-fix process will remove “zombie” projects from the long queue clearing the way for “viable” projects to connect.

Last November, Ofgem modified the Connection and Use of System Code (CUSC) and introduced a new "queue management process" to accelerate a project's connection to the grid. National Grid ESO (NGESO) quickly followed up with guidance explaining further how the new rules apply. It has also sent notifications to 144 "zombie", slowly progressing projects, requiring them to prove their viability. However, if you have received one of these notifications, it does not necessarily mean your project has "gone with the wind". And if you have a project that goes to plan to connect to the grid, the new process might just help it "go like the wind". So, take a look below and learn what queue management is, how it works, and how it will affect existing and new projects.

What is the new queue management process?

The new “Section 16” in CUSC amends the pro forma construction and offshore construction agreements (Agreement) in two ways. First, the progress of a project will be checked against specific milestones evidenced by agreed dates with the user/project developer. A new “Appendix Q” in the Construction Agreement captures both milestones and dates. NGESO will categorise a project as "viable – on track" if it achieves the milestones on time; otherwise, it will be classified as "not progressing adequately", or "stalled". Second, NGESO can terminate the Agreement of stalled projects and remove them from the queue to free up capacity. It is still unclear how NGESO will reallocate this spare capacity.

What are the milestones?

The process prescribes seven "User Progression Milestones" divided into two categories:

1. The "unforgivable" Conditional Progression Milestones (M1 – M3): Miss one of these milestones and NGESO will end the Agreement. Relevant to the permit and licensing phase of the project lifecycle, the unforgiven milestones include initiated (M1), or secured (M2) statutory consents and planning permission, and secured land rights (M3). You need to prove that you meet these milestones on an ongoing basis i.e., that granted permissions, licenses, and rights remain in place.
    
2. The potentially "forgivable" Construction Progression Milestones (M5 – M8): Missing one of the following milestones does not necessarily mean the end of the project: contestable design works submission (M5); agreement on Construction Plan (M6); project Commitment (M7); and Project Construction (M8). In that case, NGESO has the discretion to terminate the Agreement.

By when do you need to reach the milestones?

Two key dates determine the project's milestone progression timeline: the contracted completion date and from that going backwards to the date of the connection offer. A table in the new Section 16 provides details of how to calculate the milestones for a project with reference to those two dates. If the time window between the contracted completion date and the connection offer is up to two years, then you are in the advantageous position of being able to negotiate bilaterally your project's milestones with NGESO.

How is progress evidenced?

Section 16.3 CUSC and the guidance thoroughly describe the evidence that proves a project has reached each milestone. From planning application reference numbers to emails/letters, copies of binding contracts and final investment decisions to name some, evidence must be uploaded via the Connections Portal for approval by NGESO on or before the milestone due date. To ensure timely submission of evidence, NGESO will send two reminders 60 calendar days and 30 calendar days before the due date.

Within 10 days of submitting the evidence, NGESO will notify users in writing via the Portal whether they provided sufficient proof of meeting the milestone.

Which projects fall under the new process?

The process applies to onshore projects connected at transmission level. It also covers connections to the onshore transmission network for offshore wind projects. The date on which the new process came into force, 27 November 2023, determines if and how new and existing projects need to comply with the new rules.

• New connection offers: For any offers made on and after 27 November 2023, the new process applies.
• Existing offers or agreements: An existing project will follow the new process:
  • If the Completion Date is after 27 November 2025, the users have two options: (1) either adding Progression Milestones to the existing Agreement after receiving a notification from NGESO; or (2) users pay a standard modification fee and request within six months of the notification from NGESO to modify the Completion Date. These two options are users’ only chance to push the completion date back without losing their position in the queue. If the user fails to apply within the six months or the modification offer is rejected, NGESO will add milestones to the Agreement through a variation.
  • If the Completion Date is on or before 27 November 2025, the same sequence modification/variation applies but in a shorter timeframe, i.e., in two months instead of six months from NGESO's notification, provided: the project is not progressing or is not reasonably aligned with the Construction Programme in the Agreement; and there is no evidence proving otherwise.

What is the termination process?

NGESO will terminate the Agreement if the user fails to submit timely evidence on reaching a milestone; if the evidence provided is not sufficient; and if none of the exceptions that justify missing milestones applies. NGESO will start the termination process termination of the Agreement start by serving a "Default Milestone Remedy Period Notice." The recipient of the notice has 60 calendar days to provide the (sufficient) evidence and get the project back on-track. NGESO will end the agreement if a conditional milestone is missed or will exercise its discretion to terminate the agreement through an internal escalation process for missed construction milestones.

A user can always challenge NGESO's decision to end the project under the “Other disputes” resolution process prescribed in section 7.3 CUSC. However, NGESO and the user should try to find together a resolution before referring the dispute to the Electricity Arbitration Association.

Is there any way that you can bring a project back on-track?

Yes, is the short answer, in two cases:

• Extending the milestone due date: Sometimes users might miss any of the milestones for exceptional reasons beyond their control. In that case, they can request to extend the milestone due date. If NGESO rejects the request, the agreement will end following an internal escalation process.
   
• NGESO discretion: When a user misses a construction milestone, NGESO will trigger an internal escalation process to consider removing a project from the queue. NGESO will engage with the User, the relevant Transmission Operator, and if necessary, with Ofgem and DESNZ (if the Government funds the project) to explore the likelihood of meeting the milestone. The user will get a reasoned notice ending the agreement should NGESO decides so. Otherwise, the project remains classified as terminated and gets reclassified back as on-track once the user reaches the new milestone due date.

What does the new process mean in practice?

The industry’s reaction to the new process is mixed. For those advanced projects that have progressed to the licensing and construction stages, the new queue management process means at the very least they will remain in the queue. Or, ideally, getting an earlier connection date. However, we understand this is rather unlikely.

But for those developing one of the 144 projects at risk of being kicked out, the new process opens a new battlefield. The low response to the Transmission Entry Capacity Amnesty indicates that users are not willing to abandon their projects. They cannot afford to lose the significant upfront costs already paid, topped with a cancellation fee if NGESO decides to terminate the project. Therefore, some see that disputes arising from the process are inevitable.

Are things that bad? Perhaps not, especially if project delays are due to the failures of the existing planning and consenting regime. Overall, the exceptions cover a wide range of reasons that can bring a zombie project back to life. The thorniest point lies with NGESO’s discretion to terminate a project. Neither the new Section 16 nor the guidance shed enough light on how NGESO will exercise its discretion. Having a clearer view and a transparent streamlined process of the internal escalation avenue, would give users more trust and confidence in the process.

So, what can a user do? While each project is different, in principle, users should consider applying within the six-month window to amend the completion date if necessary, and to agree the milestones. When agreeing the due dates, users should not be too frugal with their proposals; instead they should go for the maximum they can especially with the unforgivable conditional licensing milestones. Finally, as NGESO suggests, users should contact NGESO immediately if they become aware of any risk of missing the milestone due date. This way, they can work together on the best way forward if an exception applies.