What does energy industry think of Ofgem’s RIIO-ED2 draft determinations?

Will the regulator’s proposals bring brighter and cleaner days for the UK’s grid?

Big Zero Report 2022

As part of its process for setting new price controls for electricity distribution companies, Ofgem has today published its draft determinations for RIIO–ED2 for the period from April 2023 to March 2028.

But how did the energy industry respond to these proposals?

Ambitious business plan 

Basil Scarsella, Chief Executive of UK Power Networks, said: “We welcome today’s draft determination which 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.

“We believe that we have an ambitious business plan, to deliver a 15% real-terms reduction in our part of the energy bill while enabling increasing numbers of electric vehicles (EVs) and heat pumps ensuring nobody is left behind in the energy transition.

“There are still a number of details to resolve, such as the design of uncertainty mechanisms and the additional investment associated with Ofgem’s proposed access and charging reforms, so that we are able to invest at a pace to match the journey to net zero that our customers and communities wish to take.”

ED2 price control period is crucial

David Smith, Chief Executive of Energy Networks Association, said: “The final determinations will need more work to give us confidence that RIIO-ED2 will be compatible with customers’ expectations of an energy system that enables the transition to net zero.

“As record numbers of EVs, renewable energy and heat pumps are introduced to our energy system, the ED2 price control period is crucial, recognising the scale of transformation and the leading role networks will play in enabling decarbonisation.”

Critical investment 

In a statement, Western Power Distribution said: “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, after adjusting for the move to CPIH.

“We are working through the detail of these draft determinations, in particular the proposed reduction in totex across each operating company.”

We must be bold 

Commenting on the release of the Draft Determination, SP Energy Networks Chief Executive Officer, Frank Mitchell said: “Ofgem’s Draft Determination on our RIIO-ED2 Business Plan follows a huge amount of work by our teams, alongside the most extensive engagement programme that we’ve ever conducted – where more than 19,000 customers and stakeholders helped to shape every aspect of our plan.

“Those customer and stakeholder voices were clear – we must be bold as we reimagine our network, and we must deliver a plan that supports the UK’s accelerated road to net zero and creates a green recovery that stimulates more high-quality jobs. That’s what we delivered in our plan.”

Less time to decarbonise the UK’s grid 

For Nigel Pocklington, Chief Executive Officer of Good Energy, there is less time to decarbonise the UK power grid than has passed since the 2008 financial crisis.

Mr Pocklington said: “It is not going to happen without significant investment, so it is good to see Ofgem recognise the scale of the challenge, including front loading investment in readying the network for clean tech.

“We know people are eager to use lower carbon, better options like EVs and heat pumps, and how quickly renewables can be deployed. This is the tech that will bring bills down in the long term. We need the network infrastructure to keep up, so that everyone can benefit.”

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