ENA welcomes Ofgem RIIO announcement

5 October 2010

ENA welcomes Ofgem announcement on RIIO

Ofgem proposals on investment in the UK’s energy networks have been welcomed by the Energy Networks Association (ENA).

Welcoming the Ofgem announcement, ENA chief executive David Smith said,

"ENA recognises that the regulatory framework within which the energy network companies operate has to change to enable the companies to meet the huge investment challenges of replacing ageing networks and building a low carbon future. We have worked closely with Ofgem over the whole of the project (called the [email protected] Project).

"ENA agrees with many of Ofgem’s RIIO recommendations –

the incentivisation of outcomes rather than cost reduction,

enhanced stakeholder engagement in the price review processes to improve the quality of companies’ business plans and ultimately price control decisions,

The specific stimulus to encourage innovation

The retention of RPI as opposed to the CPI to determine revenues and the value of companies’ regulatory asset bases.

"We do have concerns with a number of Ofgem’s recommendations on financeability (although it has slightly modified its stance following strong ENA lobbying). ENA fears that some of the financing proposals will put at risk / not compatible with the need for companies to attract significant finance for investment to ‘re-wire Britain’. We will continue to work with Ofgem to resolve these differences.

"The ultimate test will be how the RIIO recommendations are applied in practice to the current price reviews of the transmission operators (TPCR5) and gas distribution companies (GDPCR2).

For example, we need to understand how the so called ‘fast track’ process for efficient companies will operate; also, how the large degree of uncertainty is catered for over a price control period that is to be extended from the current five years to the proposed eight years.

"ENA Members are ready to meet the huge challenges of moving to a low carbon economy and welcome Ofgem’s attempt to modify the regulatory framework that has served customers so well since over the last 20 years, to facilitate this. We will continue to work closely with Ofgem to ensure that the RIIO principles are successfully applied to the benefit of both present and future gas and electricity customers."