Proposed Data Centre Commitment Fee – a helpful proposal or a potential deterrent for legitimate data centre projects?

For demand customers who have already been through the Gate 2 to Whole queue process and have received a Gate 2 offer or are expecting a Gate 2 offer, Ofgem’s latest consultation might impact your demand connections further.

Current position

 On 8 July 2025 NESO opened the Gate 2 to Whole Queue evidence submission window. Customers had to apply for a Gate 2 offer by showing their project was “Gate 2 ready” and strategically aligned with Clean Power 2030. For demand customers, transmission connections only needed to be “Gate 2 ready”, there was no strategic alignment requirement and distribution demand connections were outside the scope of the Gate 2 process.

Between November 2024 and June 2025, contracted demand in the connections queue increased from 41 GW to 125 GW. Ofgem has reported that of this, around 73 GW are data centres being mostly extra-large and hyper scale projects:

Ofgem also reports that between May 2024 and August 2025 at least 9 GW of data centres in the transmission queue have modified their connection from a battery, this is likely due to the highly oversubscribed battery connections queue. Ofgem also expects a number of modification applications in the next Gated application window, requesting a technology change to data centres.

As a result of growing demand connections, there has been a demand queue call for input[1], a DESNZ consultation[2] and an Ofgem update[3]. These various updates set out a package of reforms across three pillars:

1. Curate: reducing speculative, non-viable projects in the queue.
2. Plan: grow the data centre sector and prioritise strategic projects by using statutory powers.
3. Connection: developing new approaches to accelerate connections, including the introduction of an independent transmission licence.

Whilst reform is inevitable for demand projects, a decision is awaited on exactly what this looks like, creating uncertainty for demand customers. On 29 July 2026 Ofgem issued a further consultation on the Curate package of measures to manage the rapid growth of data centres in the demand connections queue[4]. A decision is expected later in 2026 on this consultation.

What is Ofgem consulting on?

 This consultation sets out two proposals:

1. A data centre commitment fee.
2. Specific data centre queue management milestones.

In the rest of this article we will consider these two proposals in more detail, what they mean if implemented by Ofgem and how they might impact your data centre project.

Data centre commitment fee

Where your data centre project is above 40MW, you would be required to secure a returnable financial commitment from acceptance of your grid offer until energisation. A fee of £237,500 to £712,500 per MW of requested capacity would be required. For a data centre with a connection of 100 MW, you would have to secure £23.8 million – £71.3 million. If you terminate your project or reduce the capacity, the fee or part of the fee will be forfeited.

The forms of security accepted are the same in CUSC Section 15 – performance bond, letter of credit and cash deposit.

The commitment fee would not replace the existing security requirements for projects connecting to the transmission system, both obligations would run in parallel. Ofgem is also still considering CMP417[5], which would bring all demand projects into the User Commitment Methodology.

The fee range has been proposed on the basis that it is sufficiently high to deter non-viable or speculative projects, but does not unduly distort competition or materially impact viable projects.

The commitment fee would be applied to hybrid projects as well – applicable to the capacity requested for the data centre element of the project. Where the hybrid project includes generation, the project may be subject to both the data centre commitment fee and the progression commitment fee[6].

If you have any views on this commitment fee or the value, you should respond to the consultation.

Data Centre queue management milestones

As well as the existing queue management milestones, you would also be required to evidence the additional data centre specific milestones where your project has a 10MW rated IT load threshold.

The proposed milestones are:

1. A credible end-user for at least 20% of the compute capacity for at least one year, to be satisfied 6 months post connection signature – evidence includes heads of terms or binding customer contract.
2. Procurement of long-lead electrical equipment, to be satisfied alongside M2 (Secured Statutory Consents) – evidenced by a purchase order or a binding supplier commitment.
3. Financial capability, to be satisfied alongside M6 (Agree Construction Plan) – evidenced by an investment grade crediting rating of least BBB- (Standard & Poor’s or Fitch) or Baa3 (Moody’s) or enforceable credit support committed to the project.
4. Technical readiness, to be satisfied alongside M6 (Agree Construction Plan) – evidenced by an EN50600, Telecommunications Industry Association 942 Design Certification or Uptime Institute Tier Certification of Design Documents.

These milestones would apply instead of additional queue entry requirements for data centres. If you fail to satisfy a milestone you risk being removed from the connections queue.

Who would have to comply with these requirements

These proposals are attended to apply to both existing and future projects, and to data centre projects connecting at transmission and distribution level (where your connection triggers a Transmission Entry Assessment). Whilst the Gate 2 ready criteria did not previously apply to distribution connections, these proposals would apply.

If your data centre project is due to be energised within 6 months of the commitment fee being introduced or the milestones being introduced, you would be exempt from the proposals.

You would be required to self-declare that your project constitutes a data centre. This would apply to both existing and future applicants, and to any projects that change their technology via a Modification Application.

For projects considering amending technology type to a data centre or from a data centre to a non-data centre in a future Gated Window, you should seek advice on how this might impact your queue position and the additional costs associated with data centre projects.

How we can support you

Securing a viable grid connection is a key requirement for generation, storage and demand projects. The regulatory framework keeps changing, creating uncertainty for developers. Our Infrastructure & Energy specialists can work together to support clients throughout these changes. Specifically, we can:

• Provide legal and practical advice and support in relation to securing grid connections, alternative approaches to grid connections and grid sharing structures
• Provide training on grid connection reform and related sector horizon-scanning
• Provide risk management and effective dispute resolution strategies if/when any grid connection or related issues do arise

For further information, tailored advice, or staff training, please contact Ben Sheppard,  Sophie Linnell or any member of the Infrastructure & Energy team.

[1]  Demand Queue Call for Input (CFI) | National Energy System Operator and Demand connections reform | Ofgem

[2] Accelerating electricity network connections for strategic demand (accessible webpage) – GOV.UK

[3] Connect update: demand connections reform | Ofgem

[4] Curate – Demand Connections Reform

[5] CMP417: Extending principles of CUSC Section 15 to all Users | National Energy System Operator

[6] Progression Commitment Fee (PCF) | National Energy System Operator