28th Oct 2021 11:15
(Alliance News) - National Grid PLC and SSE PLC on Thursday welcomed the decision by the UK Competition & Markets Authority over the government regulator Office of Gas & Electricity Markets' price adjustments, or 'outperformance wedge'.
The outperformance wedge saw Ofgem adjust its pricing because it expected companies to outperform in the RIIO-2 period, which runs until 2026.
This was appealed by both National Grid and SSE earlier this year. The companies also appealed Ofgem's cost of equity calculations, which cut potential returns on investment to the companies.
The CMA on Thursday directed Ofgem to remove the outperformance wedge from the price control.
National Grid, which is a FTSE 100-listed energy company operating in the UK and US, said it now expects revenue to rise from 2022 and onwards following the decision.
In August, the CMA ruled that the outperformance wedge was wrong, but upheld Ofgem's decision on cost of equity.
National Grid said: "We are pleased that, in line with its preliminary determination in August, the CMA has found in favour of the technical arguments on the outperformance wedge and that it has therefore directed Ofgem to remove the outperformance wedge from the price control.
"We are disappointed that the CMA has not found in favour on the cost of equity. We will review the detailed documents to understand the CMA's rationale for this final determination, which we expect to be published next week."
SSE, which is a multinational energy company headquartered in Perth, Scotland, said that it is however disappointed that the CMA did not uphold its appeals on the cost of equity, or on changes to how transmission network use of system charges are recovered.
The full final determinations and associated documents are expected to be provided later this week and then published by the CMA shortly thereafter, SSE noted.
SSE shares were flat at 1,662.00 pence each in London on Thursday morning. National Grid add 0.7% to 943.10p each.
By Greg Roxburgh; [email protected]
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