Regional network monopolies are girding their loins for the last leg of negotiations with Britain’s power regulator, before it binds them in December to final plans on grid upgrades.
Ofgem’s role in adjudicating the DNOs’ RIIO-ED2 five-year round of grid investments including protecting bills to customers, while securing Net Zero goals.
Its price for doing so was to demand the DNOs secure savings by ripping costs out of their existing operations. Yesterday’s rulings from Ofgem are open to public comment until 25 August.
Highlighted in the regulator’s adjudication was its desire that DNOs spend £2.7 billion as a priority enabling up to 600,000 heat pumps, and more EVs plus wind and solar parks to connect to networks.
Statements from selected DNOs in response to the Ofgem announcement underlined their apprehensions.
“Ofgem’s initial determination is tough and stretching”, SSEN Distribution said in a statement.
“While it represents an increase of 18% on SSEN Distribution’s equivalent allowances in RIIO-ED1, and recognises the innovation proposed through additional Customer Value Propositions, work is required to ensure the final settlement fully reflects customer and stakeholder needs”, it added.
Delivering efficiencies, keeping bills flat
The DNO serves 3.8 million customers at opposite ends of Britain. It pointed out its ‘extensive and robust’ evidence embedded in its RIIO-ED2 submission drew on in its largest ever engagement, to which 25,000 stakeholders contributed.
Western Power Distribution, owned by National Grid Group said it was examining the detail of Ofgem’s draft judgement.
“Against a backdrop of higher living costs for consumers, our plan set out our ambition to increase total investment levels, whilst delivering efficiencies, and keeping customer bills broadly flat in real terms,” it said in a statement.
“As we move towards final determinations, we will work hard with Ofgem to ensure we agree a price control that meets the outcomes our customers have asked of us, including resilient and reliable networks, as well as enabling the transition to net zero.”
From UK Power Networks chief executive Basil Scarsella welcomed the draft determination, but indicated details remain to be resolved.
“(The draft) challenges us to ensure that our network is able to accommodate the transition to a net zero economy at the lowest overall cost to customers and support those most vulnerable” said the UKPN boss.
Matters outstanding as the DNO progressed towards Net Zero, Scarsella indicated, include the design of uncertainty mechanisms and the additional investment associated with Ofgem’s proposed access and charging reforms.
“We look forward to working constructively with Ofgem to finalise these details and bring our plan to fruition.”