Support to Ofgem during RIIO-ED1

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Client Ofgem
Dates 2015
Service(s)Regulation & Competition

The RIIO-ED1 price control set the outputs that the 14 electricity Distribution Network Operators (DNOs) need to deliver for their consumers and the associated revenues they are allowed to collect for the eight-year period from 1 April 2015 to 31 March 2023. RIIO-ED1 is the first electricity distribution price control to reflect Ofgem’s new RIIO (Revenue = Incentives + Innovation + Outputs) model for energy network regulation.

CEPA supported Ofgem on a number of issues throughout the price review process:

  • We assisted Ofgem on developing the business plan data templates which the companies were required to complete and submitted alongside their business plans.
  • We provided economic support in assessing the Cost Benefit Analysis (CBA) submissions as part of the DNOs’ business plans. Working in tandem with Ofgem’s Costs and Outputs team, we provided both an overall assessment on the robustness of the DNOs’ approaches to using CBAs, as well as an assessment of the of the DNOs’ individual CBAs.Working on a secondment basis, CEPA staff developed options and policy for a load-related volume driver for the connection of low-carbon technologies to the distribution network.
  • We also reviewed and developed Ofgem’s asset-replacement modelling, supported the development of ‘output’ unit cost benchmarking – focused on modelling a number of group activities and combining these to form a totex view for each of the DNOs – and running various benchmarking models for the DNO cost assessment.
  • We also supported Ofgem in reviewing the companies’ innovation proposals and the overlap between this and business as usual.
Subsequent to the price control review, CEPA staff supported Ofgem during the appeals process of its final determination to the Competition and Markets Authority (CMA). Ofgem’s submissions to the CMA in relation to Northern PowerGrid’s appeals, were supported by an expert witness statement from Joel Cook a Principal at CEPA, now heading up our Sydney office.