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OFGEM WILL MAKE ITS FINAL DETERMINATIONS ON RIIO-2 AT THE END OF THE YEAR

OFGEM’S RIIO-2 CHALLENGE Imperial College London, the National
Infrastructure Commission and others.
This damning critique comes ahead of
GROUP ‘DISAPPOINTED’ WITH the deadline, with the new price control
for electricity transmission due to take
effect in April 2021 and the price control
LACK OF PROACTIVITY FROM for electricity distribution due to begin
in April 2023. The report focused on
electricity transmission, RIIO-T2, along
NETWORK COMPANIES with gas transmission and distribution,
from 2021 to 2026. The other side of
the price controls, those focused on
electricity distribution price control
AHEAD OF OFGEM’S latest round of company, none has persuaded us that (ED2), Ofgem is consulting on separately.
price controls, the RIIO-2 Challenge Ofgem’s working assumptions for the However, some have rebuffed the report,
Group has released a report critiquing cost of capital make their businesses with the Energy Networks Association
the business plans of the energy unfinanceable.” saying: “Network companies have focused
network companies. The industry came in for criticism on innovation since the beginning of
It highlights six of the group’s from the group for a number of reasons, the price control period in 2013 to drive
key findings, following over a year such as their output proposals in forward the low carbon transition,
of engagement with Ofgem, the the areas of the environment. While delivering globally recognised projects
customer engagement groups of the gas these were described as “ambitious”, that build understanding and develop
distribution companies, and the user they were also seen as “unclear” by options for greater decarbonisation.
groups of the transmission companies the group, who was unconvinced “Business plans are based on
and the electricity system operator (ESO). that consumer value propositions extensive engagement with customers
Crucially, the cost of RIIO-2 was demonstrated significant additional and stakeholders and reflect their
highlighted, reports Current±. The value for consumers. priorities. We disagree with some of the
companies that the group talked to Crucially, the group stated that: report’s conclusions and will keep our
were asking for an additional £4 billion “Given the huge transformation that focus on working with the regulator and
of expenditure compared to RIIO-1. will be required in energy networks government and stakeholders to deliver
This is an increase of 20 per cent, but to implement the energy transition the low cost, low carbon energy system
the group said that it could see little we are disappointed that no company, the public needs.”
justification for such a request. apart from the ESO, has been Ofgem will now consult on draft
It said that while there are costs genuinely proactive in shaping the determinations, looking at companies’
associated with the transition to net path to net zero.” business plans in July ahead of final
zero, they were “not a major factor in The group was initially put together determinations in November.
these expenditure plans”, which focused in November 2018 to challenge It is running regional public open
more on a business as usual approach. network companies’ business plans hearings throughout spring to allow
On the cost of the new price controls, for RIIO-2. It is an independent panel stakeholders to directly challenge these
the group has concluded that: “Despite of 13 experts formed of members from plans, and has called on stakeholders to
vigorous protestations from every Competition and Markets Authority, respond to its call for evidence.

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13/02/2020 13:38
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