In the UK, allocation of costs to the network users has, largely, been left in the hands of the distributors with the regulator having no direct influence over the prices charged to individual customer. Distribution companies largely use conventional pricing models that attempts to identify costs attributable to different customer groups domestic, industrial and commercial. On the other hand, one of the basic objectives of the ongoing reforms of electricity supply industries around the world is to promote competition in the generation and retail segments of the industry. Both generators and retailers require access to network services and therefore, a necessary pre-condition for competition to develop is open and nondiscriminatory access to transmission and distribution networks by all. Electricity prices at wholesale electricity market in UK, average at about 2‐2.5 p/kWh while the retail price of electricity is currently about 6‐7 p/kWh. Transmission and distribution networks, together with the supply business are responsible for the difference between retail and wholesale prices. With energy provided much closer to the load, the value of dispersed kWh may be higher since the costs of “bought-in” network services to facilitate product delivery from point of purchase to point of sale, is likely to be considerably lower. What is important to recognize is that the issue of competitiveness of embedded generation is a network pricing problem. At present however, distribution network pricing, conceptualized for passive distribution networks, does not recognize this impact and is not able to facilitate competition in generation. Clearly, location specific impact of dispersed generation cannot be captured by the generic cost allocation scheme currently used and this considerably disadvantages the competitiveness of dispersed sources.