27th Aug 2025 09:45
(Alliance News) - National Grid PLC on Wednesday pushed back against Ofgem's draft determination believing it does not "sufficiently recognise the practical realities" involved in expanding the transmission network.
The London-based electricity and gas utility, which operates the UK's electricity transmission network, said it welcomed the "continued positive intent" from industry regulator Ofgem, noting the commitment to an GBP80 billion investment plan in the electricity transmission sector and recognition of the need for urgency in delivery.
National Grid called changes Ofgem has made to the financial package since the sector-specific methodology decision as "valuable steps forward".
But it thinks the draft determination "does not sufficiently recognise the practical realities of delivering the biggest expansion of the electricity system in more than a generation and the required two and a half times increase in investment in our transmission network".
The comments form part of National Grid's response to Ofgem's draft determinations, part of the ongoing process to agree the RIIO-ET3 price control which covers the FTSE 100 company's Electricity Transmission business.
RIIO - which refers to revenues = incentives + innovation + outputs - is a pricing framework aimed at giving UK utilities sufficient revenue to run and invest in networks and also "efficiently deliver what customers value".
The current electricity and gas transmission and gas distribution price controls, known as RIIO-2, end on March 31, 2026. The next price control, RIIO-3, will run for five years, from April 1 2026 to March 31 2031.
In its draft determination in July, Ofgem proposals allowed expenditure of GBP24.2 billion, around 26% lower than the GBP32.7 billion spending plans proposed by the companies engaged in the review.
In some instances, Ofgem disagreed "outright with the need for the project", while in others, it called for additional clarity.
For National Grid Electricity Transmission, Ofgem proposed to set a baseline allowance at GBP4.2 billion.
National Grid called for the final determination to create the conditions required to deliver the unprecedented increase in investment.
The company said it believes changes are needed in relation to the baseline return and the incentives framework to allow "high performing networks to achieve a globally competitive overall return".
It also called for a "workable" framework which enables transmission owners to recover the "costs of their investment and allows them to progress projects at the pace expected by our stakeholders".
"Both investability and workability are necessary for transmission owners to be able to meet the commitments put forward in their business plans including accelerating the decarbonisation of the energy system, and cost savings for consumers," National Grid said.
The company pledged to engage with Ofgem to "agree a price control that attracts the investment needed to ensure the reliable and affordable flow of clean electricity whilst also meeting the ramp up in demand for power".
The final determination is expected in December.
Shares in National Grid were up 1.4% to 1,061.50 pence in London on Wednesday morning.
By Jeremy Cutler, Alliance News reporter
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