Option for indicative up-front approval Clause 2.2.2 of the draft Mechanism sets out that a distributor may seek indicative approval of planned expenditure under the Mechanism to as 'indicative ―referred approval'. During our consultation process, some distributors saw value in implementing a simple Mechanism that would enable them to have certainty when committing projects. We consider that extending our usage of the up-front approval process will assist distributors in adapting to the new compliance procedure. This will build on the understanding we have built with distributors over the life of the current DMIA. Indicative approval is available under the current DMIA. It was not sought for any projects. We also did not deny any projects under the current DMIA. Given the strengthening of the eligibility criteria and the reporting requirements, we consider that distributors may seek indicative approval under the new Mechanism. To receive indicative approval, a distributor must provide us details of the proposed projects before the end of the first month in the relevant regulatory year. We will then assess the projects and provide an in-principle indication of whether this proposed expenditure is likely to satisfy the project criteria. This involves an in-principle examination of whether proposed expenditure the Mechanism is likely to satisfy the Mechanism's criteria when we undertake our ex-post assessment of the allowance spent. This provides greater certainty of what costs distributors are likely to recover under the Mechanism. This is not an ex-ante assessment process. The Mechanism's official approval process remains an ex-post assessment of the projects' adherence to the project and compliance procedures. This is neither an alternative nor a substitute to the actual ex post assessment that we will subsequently conduct for that particular regulatory year. However, if the distributor's proposed expenditure is approved in principle, and its actual expenditure does not differ in substance and/or form from that envisaged at the beginning of the regulatory year, we would expect to approve that expenditure as part of our ex-post assessment.
Option for indicative up-front approval Clause 2.2.2 of the draft Mechanism sets out that a distributor may seek indicative approval of planned expenditure under the Mechanism ―referred to as 'indicative approval'. During our consultation process, some distributors saw value in implementing a simple Mechanism that would enable them to have certainty when committing projects. We consider that extending our usage of the up-front approval process will assist distributors in adapting to the new compliance procedure. This will build on the understanding we have built with distributors over the life of the current DMIA. Indicative approval is available under the current DMIA. It was not sought for any projects. We also did not deny any projects under the current DMIA. Given the strengthening of the eligibility criteria and the reporting requirements, we consider that distributors may seek indicative approval under the new Mechanism. To receive indicative approval, a distributor must provide us details of the proposed projects before the end of the first month in the relevant regulatory year. We will then assess the projects and provide an in-principle indication of whether this proposed expenditure is likely to satisfy the project criteria. This involves an in-principle examination of whether proposed expenditure the Mechanism is likely to satisfy the Mechanism's criteria when we undertake our ex-post assessment of the allowance spent. This provides greater certainty of what costs distributors are likely to recover under the Mechanism. This is not an ex-ante assessment process. The Mechanism's official approval process remains an ex-post assessment of the projects' adherence to the project and compliance procedures. This is neither an alternative nor a substitute to the actual ex post assessment that we will subsequently conduct for that particular regulatory year. However, if the distributor's proposed expenditure is approved in principle, and its actual expenditure does not differ in substance and/or form from that envisaged at the beginning of the regulatory year, we would expect to approve that expenditure as part of our ex-post assessment.
AER%20-%20Explanatory%20statement%20-%20Draft%20demand%20management%20innovation%20allowance%20mechanism%20-%20%2028%20August%202017.docx