OFGEM proposal to cut National Grid’s RIIO allowance by £185m

Electricity Pylon PhotoA mid period review by OFGEM has led to proposed to reduce the budget for the National Grid’s RIIO-T1 price control framework.  The consultation that was published on 18 August saw regulator OFGEM explain the proposal by stating that since the beginning of the RIIO-T1 price control in 2013, money that had been allocated to National Grid for several uses had required a revision.  OFGEM further proposed to reduce National Grid’s fault level protection allowance by £38.1m and increase its system operator allowance by £21.5m in order to ensure optimal management of additional balancing services.

The RIIO-T1 model (Revenue= Incentives+ Innovation + Outputs) was one of the first price controls to reflect the new model. The RIIO framework is designed to promote smarter gas and electricity networks as part of carbon reduction efforts, with the framework is set to last until 31 March 2021.

OFGEM will collate responses until 6 October, with any proposed changes following OFGEM’s consultation to take effect from 1 April 2018. Full details and the consultation document can be found here.

Source: Cornwall Energy, OFGEM