Page 6 - Gi_May2021

industry & Government news

DIGEST

UK ENERGY NETWORKS AKSHAY KAUL, OFGEM

APPEAL AGAINST rate is still the lowest ever proposed
for a regulated network company, and
well below the 5.6 per cent suggested by
OFGEM’S PRICE CONTROL National Grid, reports The Guardian.
In the past, the regulator has been
criticised for allowing energy network
firms to rake in bigger than expected
profits, by approving company
NINE ENERGY NETWORK companies are Scotland Gas Networks, Scottish Hydro spending plans that are higher than
seeking permission from the Competition Electric Transmission, SP Transmission necessary and plans to recover
and Markets Authority (CMA) to appeal and Wales & West Utilities. generous returns from energy bills.
against Ofgem’s price control. Rob McDonald, Managing Director of Senior executives have speculated that
They are appealing against changes SSEN Transmission, said: “Our appeal Ofgem may feel under pressure to prove
to the electricity and gas transmission raises technical but very important that it can be tough on company profits.
and gas distribution licences, which issues that we are asking the CMA to John Pettigrew, Chief Executive of
set out how much energy companies correct. In the meantime, we can start National Grid, said Ofgem had “ultimately
can charge their customers – the result to deliver against our stakeholder-led ignored certain evidence” presented by
of the RIIO-2 price control decision business plan and build our network for the industry in its consultation, and had
issued by Ofgem in December 2020 for net zero, supporting government climate underestimated the financial risk of its
the period between 1 April 2021 to 31 change targets and the green recovery major infrastructure investments by
March 2026. from the coronavirus pandemic. setting returns that are too low.
The appeals largely focus on the “We would like to thank Ofgem for Ofgem said the rate was based on
allowed return on investment and the its constructive engagement following an assumed cost of equity of 4.55 per
way Ofgem calculated the costs the publication of its Draft Determinations cent, which it believes could fall lower
companies would spend on maintaining and while it is regrettable we have if companies perform better than their
and investing in their networks over the been unable to reach agreement on efficiency targets. Pettigrew described
next five years, reports Energy Live News. all aspects of the final price control the so-called “outperformance wedge”
The regulator’s decision means settlement, we will continue to work as “a curious mechanism” that is
returns will be reduced for the owners constructively with Ofgem and all “conceptually and practically flawed”.
of electricity and gas infrastructure in stakeholders as the CMA considers the National Grid said its credit rating
Britain by almost 40 per cent. merits of our appeal.” faced a downgrade based on the parts
The nine firms seeking permission to Ofgem softened its stance at the end of of the regulation that it would accept,
appeal the price control are Cadent Gas, last year by raising the energy company’s but it would continue to pay a rising
National Grid Electricity Transmission, allowed returns on investment from dividend to its shareholders. Instead
National Gas Grid, Northern Gas its original proposal of 3.95 per cent to of tracking the retail prices index, the
Networks, Southern Gas Networks, 4.3 per cent for the next five years. The dividend would track the consumer
prices index, it said.
Akshay Kaul, Ofgem’s networks boss,
said the regulation “drives a fair price
for consumers, improves services and
boosts green energy investment”.
“We respect the Competition and
Markets Authority appeal process,
where we will defend robustly our
decisions which are in the best interests
of consumers and tackling climate
change,” he said.
“While the appeals could take
around six months to resolve, they
will not delay any investment and we
look forward to working closely with
industry to accelerate investment for a
THE NETWORKS ARE GEARING
UP FOR A LEGAL FIGHT green recovery.”

06

15/04/2021 13:56
News.indd 1
News.indd 1 15/04/2021 13:56