SSEN statement on Ofgem’s RIIO2 Sector Specific Methodology Decision
Scottish and Southern Electricity Networks (SSEN) notes today's detailed update from Ofgem on the outcome of its sector specific consultation and will fully assess this next step in the price control process in the coming days.
Although Ofgem has revised its position in some areas, SSEN retains its concern, as set out in its response to Ofgem's consultation (1), that the proposed framework fails to fully balance stakeholder and consumer needs with the requirement to provide investor confidence and attract the significant investment needed to enable the clean energy transition.
In particular, SSEN remains very disappointed with the proposed Cost of Equity range which runs contrary to the independent analysis provided to Ofgem on the level of risk inherent in the delivery of critical electricity transmission infrastructure.
A key strength of the RIIO1 price control was in the positive consumer outcomes gained through a targeted and robust incentive package. SSEN believes further change is required in the incentives for RIIO2, where Ofgem continues to propose a framework which blunts existing efficiency incentives in an attempt to secure predictable outcomes. This will risk harming consumers in the long run and jeopardise progress in achieving government policy objectives.
SSEN is currently preparing to submit its first draft business plan for the next transmission price control, where Ofgem has said the role of stakeholders, including consumers, will be key. It is, therefore, even more critical that Ofgem remains open to feedback and substantive change that will allow the development of business plans that fully deliver on stakeholder ambitions.
There remains much to be decided and final proposals are not due until late 2020. During that time, SSEN will continue to advocate constructively and robustly for a regulatory framework that strikes the right balance between ensuring efficiency and affordability with delivering the necessary investment to improve services for consumers and drive further progress towards a low carbon, flexible energy system.