Ofgem reviews National Grid’s price controls

A review into National Grid’s price controls for electricity and gas transmission has been launched. The mid-period review into the 2013 to 2021 price controls will be limited to National […]

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By Priyanka Shrestha

A review into National Grid’s price controls for electricity and gas transmission has been launched.

The mid-period review into the 2013 to 2021 price controls will be limited to National Grid Electricity Transmission and Gas Transmission.

Ofgem initially set the price controls – called RIIO or Revenue = Incentives + Innovation + Outputs – for power and gas distribution in 2013. The framework is designed to promote smarter gas and electricity networks for a low carbon future.

RIIO-T1 sets the outputs that electricity and gas transmission network companies need to deliver for consumers and the associated revenues they are allowed to collect for the eight-year period from 1 April 2013 until 31 March 2021. RIIO-GD1 sets these for gas distribution companies.

As part of the price controls set three years ago, a provision was made for a mid-period review of the outputs companies have to deliver for customers if there were changes to government policy or the needs of consumers and network users.

The regulator stated: “Ofgem has not identified any issues to justify a mid-period review for the 2013-2021 electricity transmission price controls of SP [ScottishPower] Transmission and Scottish Hydro Electric Transmission or for the 2013-2021 gas distribution price control.”

The review is not intended to re-open the price control, for example change key financial aspects such as the allowed cost of capital, as it does not want to “shake the confidence of investors”.

One of the areas Ofgem will review is National Grid’s Avonmouth gas pipeline outputs, which were included in RIIO-T1 to help deliver security of supply.

However the regulator states the project, worth around £165 million, may no longer be required so it will assess if any action is required.

That would mean taking away the funding and considering it for other projects instead.

A decision on the proposals will be made later this year and any changes would take effect from April 2017.