One of the many moving parts a developer needs to consider when planning a new housing development is securing an electricity supply to the development. While some developments benefit from existing apparatus on site or nearby which can be connected into, more often than not, new homes on undeveloped land will require a new electricity substation to be installed and powered up.

Even if the substation itself and the cabling is all in place on the ground, a new substation cannot 'go live' until all the legal paperwork is in place, which can be quite complicated. This article sets out the process involved and provides some tips to help avoid or mitigate delays in getting electricity to the substation, the development site and of course, the new houses.

Typically, there are two parts to the process.

The first part involves the developer either selling or granting a long lease of the land on which the substation is constructed to an Independent Distribution Network Operator ("IDNO"). The IDNO is responsible for the local distribution network which the developer wishes to connect into.

The IDNO then usually subleases part of the substation site to a Distribution Network Operator ("DNO"). The DNO (generally SSEN or Scottish Power) will be responsible for the electricity network from the transmission grid to the local distribution network.

Both the IDNO and the DNO need to be satisfied that the developer owns the land on which the substation and the cabling are located and that there is nothing in the developer's title that will impede the use of the electricity substation. The IDNO will usually accept a certified confirmation from the developer’s solicitor on the title but the DNO's solicitor will generally insist on reviewing the developer's title. And so, to avoid delay it is key to ensure that as the developer you have the full suite of title documentation (title, planning documentation, and local authority searches) as early as possible so that any issues raised can be addressed at the earliest opportunity.

Liability for environmental contamination is often an issue for substations. Standard terms will usually require the developer to indemnify the IDNO for any liability and costs incurred in connection with any claim made against them in respect of environmental contamination. Developers will want to resist giving such an indemnity because they have relied on third parties to investigate the ground conditions of a site and will require the IDNO and DNO to satisfy themselves on the contents of any ground investigation reports. This can be backed up with letters of reliance from the authors of the reports addressed to both the IDNO and the DNO.

Despite delivery of letters of reliance being common for substation transactions they are often a sticking point so it is best being bottomed out as early as possible and developers should agree a form of letter of reliance that the author can provide and the IDNO and DNO can accept.

There are other key issues that can hold up the process is the need for:

    • planning permission to be in place for the substation (as the substation is not always covered by the planning permission for the housing development) or alternatively, confirmation from the planning authority that planning permission is not required;
    • the developer’s lender’s consent to the sale or lease of the substation site and release of the site from its security or an undertaking not to enforce its security over the substation site; and
    • exclusion of the IDNO and DNO from any liability for obligations in any planning agreement attached to the site/development and if no exclusion can be given, then they will require an indemnity from the developer.

    A final point to bear in mind is that the substation is energised only once both parts of the transaction are completed. This means that the IDNO and DNO need to finalise their sublease and that transaction can only proceed when the original sale/lease between the developer and the IDNO has taken place. All of this takes time, generally a number of weeks which must be built into a developer’s development programme.

        Contributor

        Cameron McKay

        Senior Associate