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National Grid accepts all Ofgem price control arrangements

3rd Mar 2023 10:33

(Alliance News) - National Grid PLC on Friday said it accepted all price control arrangements proposed by Ofgem, Britain's government regulatory for electricity and gas.

National Grid is a London-based multinational electricity and gas utility company.

The price arrangements cover the company's National Grid Electricity Distribution businesses for the period from April 2023 to March 2028. "These price controls will further accelerate our delivery of smart, decarbonised electricity distribution networks in the UK, at the lowest cost to customers," National Grid said. It added that they also form an "important" part of its wider financial framework, with up to GBP40 billion of investment from 2021 to 2026.

National Grid shares were effectively unchanged at 1,026.87 pence each in London on Friday morning.

In November, Ofgem confirmed a five-year investment package for April 2023 to March 2028 for the electricity distribution network companies to help deliver "cheaper, cleaner, more reliable local grids".

Ofgem had explained that RIIO-ED2, the name of the price control arrangements, stands for "Revenue = Incentives + Innovation + Outputs for electricity distribution".

The regulator had said for the half-decade, six distribution network operators in the UK will be allowed 6.2% to 15% less funding than what they requested.

National Grid Electricity Distribution will be allowed GBP5.98 billion totex, 13% lower than the GBP6.89 billion it had requested, while Scottish & Southern Electricity Networks will be allowed GBP3.59 billion, 15% lower than its request of GBP4.24 billion.

Ofgem on its website explains that totex "generally consists of all the expenditure relating to a licensees regulated activities but with the exception of some specified expenditure items."

Ofgem explained that networks will be expected to provide "more benefits" by lowering returns to investors and driving more efficiencies within their companies. It also aims to move away from the import of fossil fuels to the UK.

Further, the regulator said it is expecting "major changes" to the energy system over the next years, such as increased use of green and renewable energy, increased demand for electricity due to an anticipated rise in demand in electric vehicles and for electric heat pumps in homes, an increased use of smart devices which could save energy, and the creation of an independent future system operator. That operator could play "a key role in local energy planning and distribution system operation," Ofgem said.

By Tom Budszus, Alliance News reporter

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Copyright 2023 Alliance News Ltd. All Rights Reserved.

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