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National Grid welcomes Ofgem price framework but SSE warns on risks

18th Jul 2024 10:37

(Alliance News) - London-listed electricity utilities National Grid PLC and SSE PLC on Thursday gave a mixed response to the UK energy regulator's framework for price controls in the five years from 2026 to 2031.

The Office of Gas & Electricity Markets, known as Ofgem, published its methodology decision for the next price control period, running from April 1, 2026 to March 31, 2031 and known as RIIO-3.

Ofgem noted that its final decision on network investment and consumer bills will not be taken until late 2025, following analysis of the business plans of gas and electricity companies.

Ofgem set its "early view" of cost of equity at 4.57% at the low end and 6.35% at the high end.

National Grid responded positively. "Overall, we are pleased to see Ofgem continuing to recognise the need for an appropriate financial framework that retains and attracts the capital the sector requires as it embarks on a big step up of investment," the company said.

However, it said Ofgem will need to ensure the price control it sets is "investable" for the utility providers.

SSE was more cautious, saying the regulator needs to "aim up" when setting the final cost of equity for the period.

It said its initial assessment is that "Ofgem will need to aim up when setting the cost of equity to deliver the scale of investment required to build the future electricity network the country needs".

"With a new national mission to deliver clean power by 2030 in order to boost energy security and protect future consumers, unlocking the right level of investment during the next price control will be key," said SSE Chief Financial Officer Barry O'Regan.

"It is crucial that Ofgem set an appropriate cost of equity that recognises the high level of risk borne whilst attracting the unprecedented levels of investment required to decarbonise the economy and deliver net zero. Based on our initial assessment, further work is required on the specifics around investability that would enable the UK to compete for finance globally."

Separately, SSE said its operational performance in the first quarter of its financial year was in line with expectations. It highlighted that renewable power output was up 60% annually in the recent quarter.

SSE said the financial expectations for its individual business units that it set out in May with its annual results are unchanged, "subject to weather, market conditions and plant availability across the key winter months to come".

London-based National Grid operates electricity and gas transmission networks in the UK and the northeastern US. Perth, Scotland-based SSE is an electricity transmission and distribution utility.

National Grid shares were up 0.1% to 934.64 pence early Thursday in London. SSE shares were up 0.4% to 1,842.59 pence.

By Tom Waite, Alliance News editor

Comments and questions to [email protected]

Copyright 2024 Alliance News Ltd. All Rights Reserved.

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