Ofgem publish Strategy Decision

The Times and Utility Week approached us for comment this week on the publication of Ofgem’s Strategy Decision. A key milestone on the path to next price control period. This will be followed by the submission in July of the electricity distribution network operators submission of their Business Plans. These will be the most comprehensive ever seen and will be eagerly read by a wide stakeholder group. The process will culminate in April 2015 with the commencement of the new price control period, which for the first time will run for eight years instead of the previous five. The price control process is the first for electricity distributors under the new RIIO process which embraces innovation and outputs at its heart.

We made clear this week that the RIIO-ED1 price review comes at a critical time for distribution companies. They are faced with the challenge of renewing ageing assets whilst at the same time planning for the delivery of a low carbon energy future. This future will bring the potential for a doubling in electricity consumption over the next decades. It will also need to accommodate increasing small scale diverse sources of generation. DNOs recognise the very important role in assisting vulnerable customers and the fuel poor.  At the same time companies continue to look at how to efficiently manage their existing assets and examine innovative ways of utilising the electricity network to ensure that we minimise the impact on customers’ bills.

The Companies will need to read in detail the implications of the Decision document but these are some of the key challenges that must be addressed in it.

Hannah Nixon, Senior Partner, Distribution at Ofgem said “the RIIO-ED1 framework clearly sets out that we expect the network companies to play a full role in demonstrating improved stakeholder engagement and delivering a better customer experience at value for money to consumers.

The network companies are important in delivering electricity to our homes but the customer doesn’t have any direct contact with them. Through this price control we are directing them to take a more active approach, such as identifying vulnerable customers and providing more help, for example when a power cut occurs. It is an important step-change in approach and we expect to see clear evidence in their business plans of how they plan to deliver for consumers.”

Ofgem made clear that an important element of the timeframe RIIO-ED1 covers is the anticipated increased take-up of low carbon technologies such as electric vehicles and heat pumps but added that it remained uncertain when and to what extent this will occur.

The Strategy Decision overview can be read here.


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