Networks give mixed welcome to Ofgem Price Review paper

17 December 2010

Networks give mixed welcome to first Ofgem Price Review paper after RIIO

ENA acknowledges the publication of Ofgem?s Initial Strategy consultation which will seek to implement the principles of the new RIIO model. The consultation covers the price control reviews of both the gas transmission and distribution, and the electricity transmission companies which will take effect from April 2013 through to March 2018.

These reviews are extremely important in the context of the transition to a low carbon society and, as was made clear by Ofgem recently, the need for £32bn of investment by the energy network companies over the period to 2020.

David Smith, Chief Executive of Energy Networks Association (ENA) said "These reviews come at a critical time. It is also significant that they come the day after the boldest reappraisal of the energy market, the Electricity Market Reform, has been launched by the Government.

"The industry is scrutinising the consultation documents carefully and support those aspects of them that will help GB?s energy network companies support our low carbon future and deliver value for the consumer."

However, there are concerns surrounding the proposed financial package outlined in the consultation. David said: "Investors are ultimately free to choose from global opportunities in the energy and other infrastructure sectors, many of which offer higher returns than recently allowed by GB?s regulatory authorities. At face value, today?s proposals will not deliver the investment required in GB infrastructure over the period to 2020. Unless Ofgem get the proposals for financeability right and the returns are appropriate, the GB companies? ability to finance an unprecedented increase in investment, which is vital to the country?s infrastructure, will become an impossible task."

David concluded by saying: "There is a lot of information in the documents that Ofgem has published and the companies will be studying them in detail over the next few weeks before responding to Ofgem by 4thFebruary 2011."

ENDS

Notes to editors:

1. The paper is an Initial Strategy Consultation from Ofgem (together with supporting documents) covering the price reviews of the gas distribution companies (GD1) and the electricity and gas transmission companies (T1) – it can be found on the Ofgem website at: http://www.ofgem.gov.uk/Media/PressRel/Documents1/RIIO%20T1G1.pdf

2. The paper will be followed by a decision document in March which will outline the proposed strategy for the review and decisions on a number of important review parameters.

3. These reviews will be the first time that the recommendations of Ofgem?s RIIO model are implemented.

4. The RIIO Framework was introduced by Ofgem this July. It stands for setting Revenue using Incentives to deliver Innovation and Outputs.

5. ENA represents the "wires and pipes? transmission and distribution network operators for electricity and gas in the UK and Ireland.

For further information please contact:
Tim Field, Press and Public Affairs Executive
Energy Networks Association
E: [email protected]
T: +44 (0)207 706 5157
M: +44 (0)7725 372 758
W: www.energynetworks.org