Onshore electricity transmission competitive tendering

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Client Ofgem
Dates 2015
Service(s)Policy & Economics, Regulation & Competition

Following its Integrated Transmission Planning and Regulation (ITPR) project, Ofgem, Great Britain’s energy regulator, has been developing competitive tendering as a delivery route for high-value and separable onshore electricity transmission projects. Ofgem already applies a competitive tendering approach for offshore transmission licences.

CEPA, in association with TNEI and Lions Head Global Partners, worked with Ofgem to develop the market offering for Competitively Appointed Transmission Owners (CATOs), the electricity transmission licensees who will be responsible for designing, building, financing and operating the onshore electricity transmission projects. Our regime work has spanned a range of financial, commercial and regulatory issues.

We have been helping Ofgem to consider the framework that should be used to set the regulated revenue stream of a CATO, including the length (duration) of the revenue term, approach to openers and the indexation of the revenue stream to a measure of inflation. We have also been considering how issues such as residual value might be treated in the regulatory regime and how outputs that the licensee will need to over the duration of the revenue term could be financial incentivised to deliver good outcomes for customers.

Ofgem recently published a consultation, supported by a published CEPA report, seeking initial views on its regulatory policies for onshore competitive tendering. Ofgem’s consultation and CEPA’s report are available through the links.

Separate to the market offering work, CEPA also undertook a review for Ofgem of the experience of competitive tendering in UK infrastructure and electricity transmission sectors internationally. This work focused on key aspects of the tendering model applied in other sectors and how issues such as management of consenting risk are addressed.

A CEPA research note of the experience and potential benefits of a competitive tendering delivery route can be found here.