Ofgem sets out expectations for linking DCC senior manager pay to operational performance under DCC2 framework

Ofgem has published its expectations for how the Data Communications Company should structure senior manager pay under the incoming DCC2 regulatory framework, with a consultation on draft guidance that closed on 5 August 2026^[1]. The policy is designed to tighten the connection between executive remuneration and DCC's operational delivery and value for consumers^[1].

What the guidance requires

The draft guidance is issued under Condition 20 of the Smart Meter Communication Licence and sits alongside the wider DCC2 framework covering operational performance, business planning, and cost control. Under the new arrangements, DCC will be required to submit its remuneration policy to Ofgem for approval.

The stated aim is to ensure that pay outcomes are:

• Clearly evidenced and aligned to delivery
• Linked to DCC's performance against operational targets
• Consistent with value for money for consumers

Ofgem has previously signalled it intends to publish annual performance and value-for-money reports drawing on DCC's KPIs, customer satisfaction surveys, cost management, and delivery of price-control-funded initiatives.

Why this matters now

The remuneration guidance arrives at a critical juncture in the DCC transition. The Successor Smart Meter Communication Licence was awarded to DCC2 Ltd - a wholly owned subsidiary of the Smart Energy Code Company (SECCo) Ltd - on 14 April 2026. Responsibility for delivering the Authorised Business will transfer from the incumbent Smart DCC Ltd to DCC2 Ltd on 2 November 2026, the date Ofgem has designated as the Transfer Date.

DCC operates as a monopoly providing the centralised, secure communications network for smart metering in Great Britain, which means its costs and governance are subject to Ofgem's licence regime rather than competitive market discipline. That monopoly status is precisely why Ofgem considers explicit remuneration oversight necessary: without it, there is no market mechanism to align executive incentives with consumer outcomes.

The broader DCC2 framework

The remuneration policy is one component of a substantially redesigned regulatory model. The new licence introduces a not-for-profit structure, an ex-ante cost control regime, and independent governance arrangements. Ofgem is simultaneously moving from an ex-post form of price control to a forward-looking ex-ante framework - the first time it has fully assessed DCC's revenues upfront.

The first Price Control Period runs from November 2026 to March 2028. Alongside the remuneration guidance, Ofgem has also consulted on proposed changes to Regulatory Instructions and Guidance for the second Price Control Period, which starts 1 April 2028.

What to watch

The consultation closed on 5 August 2026, and Ofgem has not yet published its decision on the final guidance. The key question for the sector is how tightly Ofgem will define the performance metrics that gate senior pay - and whether the framework will include downside provisions that can claw back remuneration when operational targets are missed. Given that DCC2 is a not-for-profit entity without shareholder equity to discipline management, the remuneration policy may become one of the more consequential levers Ofgem holds over the new licensee's day-to-day governance.