Ofgem

Energy networks respond to Ofgem’s settlements for RIIO-2

David Smith, Chief Executive of Energy Networks Association responds to Ofgem’s settlements for the RIIO-2 price control period. Ofgem has published their settlements for the next network price control, known as RIIO-2. For the transmission and gas distribution networks and system operator, RIIO-2 will come into effect next year and

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Ofgem Highlights Western Power Distribution’s Hard Work

It has recently been highlighted by Ofgem that DNOs should follow in the footsteps of Western Power Distribution in a bid to develop the operational capacities of their grids. The call-out to other DNOs has been made after recognition for Western Power Distribution’s move towards maximising the capacity it has

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Energy Firms Lock Horns over Potential Mid-period Review (MPR)

Energy companies are divided over the need for a mid-period review (MPR) within the present eight-year price control for businesses operating both in electrical energy and gasoline transmission, and fuel distribution. Big six provider British Gas and consumer body Citizens Advice are heading up the decision for an MPR for

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Latest Issue

BDC 321 : Oct 2024

Ofgem

Energy networks respond to Ofgem’s settlements for RIIO-2

David Smith, Chief Executive of Energy Networks Association responds to Ofgem’s settlements for the RIIO-2 price control period. Ofgem has published their settlements for the next network price control, known as RIIO-2. For the transmission and gas distribution networks and system operator, RIIO-2 will come into effect next year and run for five years until 2026. Speaking on behalf of electricity transmission and gas network operators, David Smith, Chief Executive of Energy Networks Association said: “Delivering the Prime Minister’s Ten Point Plan for a Green Industrial Revolution, keeping energy flowing to homes and businesses, and achieving Net Zero emissions requires sustained investment, innovation and a supportive and forward-looking regulatory regime. We will be studying the detail of Ofgem’s determination over the coming weeks to ensure it stands up to these challenges.”

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Ofgem Highlights Western Power Distribution’s Hard Work

It has recently been highlighted by Ofgem that DNOs should follow in the footsteps of Western Power Distribution in a bid to develop the operational capacities of their grids. The call-out to other DNOs has been made after recognition for Western Power Distribution’s move towards maximising the capacity it has within its grids through the provision of flexible connections to renewable developers. As of right now, Western Power Distribution has queued approximately 7.6GW of generators, which some 4.8GW of that comprising of solar panel schemes set to improve the ratio between renewable and non-renewable energy sources – something which is widely regarded as a positive step forward in ensuring the sustainable future of the market. Most specifically, Ofgem nodded to Western Power Distribution’s reconfiguration of subsections of the grid to allow for connections to be made far more swiftly, as well as how the organisation has been pioneering the usage of flexible connections, such that generators commit to cutting their output during period of considerable demand without any form of compensation to then be reconnected. Additionally, as a result of the increasing size of the renewable energy market, Ofgem has also called for DNOs to also look into new methods through which they may be able to deliver further capacity and improve the speed of connections; this is primarily to be through the use of funding in price controls. Presently, Ofgem has also been assessing schemes put forward by DNOs to facilitate investment. Dermot Nolan, Chief Executive of Ofgem commented: “We want DNOs to take creative approaches to speeding up renewable connections,” then adding that such organisations should also be looking to enable earlier investment into expanding capacity where necessary, allowing for a minimisation of energy bills across the board. Additionally, it has been stated that Ofgem has also issued a consultation to collate feedback from renewable generators on how well they feel that DNOs are actually communicating with potential network customers.

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Energy Firms Lock Horns over Potential Mid-period Review (MPR)

Energy companies are divided over the need for a mid-period review (MPR) within the present eight-year price control for businesses operating both in electrical energy and gasoline transmission, and fuel distribution. Big six provider British Gas and consumer body Citizens Advice are heading up the decision for an MPR for all three sectors to establish whether the existing price control is appropriate. That call will take into account whether providers are offering value for money to consumers as well as addressing what has been described as the systemic “outperformance” of network operators according to their required outputs. In its recent submission on the potential MPR to the regulator, Ofgem, British Gas conceded: “We recognise that much has changed since the first round of RIIO price controls were finalised which, in turn, has significantly impacted consumers’ interests”. Charity and consumer lobbyist, Citizen’s Advice reported that the average return on investment for network companies in T1 and GD1 is “well in excess of what appears appropriate for such low-risk investment” – a stonking 9.4%. The charity went on express its support for an MPR and it represents “an opportunity to identify the root causes of outperformance, for both transmission and gas distribution.” It was only last November that Ofgem recommended an MPR, asserting that, over the last 12 months, it had recognised some issues with price control management that an MPR could address. Issues identified included by the body included: network output measures, strategic wider works submissions, and incentive on both consumer and stakeholder sides. Ofgem didn’t, however, establish any points for gas distrbution that required reform. As could be predicted, network operators have welcomed Ofgem’s findings on gas distribution while disagreeing with its support for a transmission-focused MPR, insisting the issues identified could be resolved without a sector-wide review. Trade body the Energy Networks Association (ENA) chipped in, saying the changes resulting from the price control are “within the range of uncertainty anticipated in the design of RIIO-T1 and can be managed through the existing uncertainty mechanism,” adding that an MPR runs the risk of creating two four-year price controls and may “undermine longer term investor confidence.” “Our transmission operator members would urge Ofgem to consider the longer term customer interest when assessing the scope of the RIIO-T1 MPR and not just the short terms benefits within the last four years of this price control,” ENA said. Distribution and transmission operator, SP Energy Networks was the single provider to say it would support Ofgem’s decision if an MPR get the go-ahead. The company did however add that it felt the issues could be resolved more successfully with the employment of specialist firms and bodies. SP Energy networks went on to insist that, “as a matter of fairness”, all companies – not just distribution – ought to reviewed if an MPR does go ahead.

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