Ofgem consults on proposed changes to the OFTO tender process

Ofgem has published a consultation that marks a pivotal moment in the evolution of the Offshore Transmission Owner (“OFTO”) regime, which is available to read here. With some OFTOs nearing the end of their 25-year Tender Revenue Stream (“TRS”) period, Ofgem’s consultation seeks stakeholder input on reforms to ensure continued operation of technically viable assets and avoid premature decommissioning (the “Consultation”).

The Consultation focuses on four key areas: 1) HVDC availability; 2) Control of OFTO assets; 3) Generator Commissioning Clause (“GCC”) reform; and 4) Bidder incentive mechanisms.

High Voltage Direct Current (“HVDC”) Availability

As HVDC systems become more prevalent in offshore transmission, Ofgem is exploring how to ensure high availability while recognising the unique challenges these assets pose. Stakeholders are invited to comment on whether the current 98% availability target remains appropriate for HVDC systems, and how incentives and penalties should be structured to ensure effective performance.

Ofgem is also considering whether HVDC-specific metrics or thresholds should be introduced to better capture operational realities and risk exposure.

OFTO Asset Control

Ofgem is reviewing how generator led operations and maintenance (“O&M”) offers and shared infrastructure impact the OFTO’s ability to control their assets. While low-cost O&M deals can reduce expenses, they may limit the OFTO’s independence, create access challenges, and weaken performance incentives – especially in HVDC projects. The Consultation asks whether licence rules need tightening to safeguard operational control and accountability. Ofgem is seeking views on:

• Whether current license conditions provide sufficient clarity;
• The allocation of control in multi-party arrangements; and
• The safeguards needed to ensure accountability and operational resilience.

This reflects a broader shift towards a coordinated offshore transmission planning approach.

Extension of the Generator Commissioning Clause

The GCC currently allows developers 18 months to commission transmission assets before the formal OFTO transfer. Ofgem proposes extending this by 6, 9 or 12 months, citing benefits such as improved asset readiness and reduced snagging, more robust bidder due diligence and better alignment with financing and procurement timelines.

A 9-month extension is seen as a balanced option, though final decisions will depend on stakeholder feedback and the Department for Energy Security and Net Zero (“DESNZ”).

Bidder Incentive Mechanisms

To enhance the efficiency of the tender process, Ofgem is considering requiring vendor due diligence reports to reduce burdens on bidders. While this could lower costs and streamline evaluations, questions remain around liability and reliance on third-party reports, the need for protection for OFTO lenders and potential resistance from bidders who prefer independent assessments.

Next Steps

The Consultation invites responses from developers, OFTOs, investors, potential bidders, and the wider public on the four key areas. This Consultation remains open until 8 September 2025, with final decisions on reform expected later in the year.

Co-authored by Sofie Santry, Trainee Solicitor at CMS