Ofgem has decided to carry out a mid-period review (MPR) into price controls for National Grid Electricity Transmission (NGET) and National Grid Gas Transmission (NGGT).
It is reviewing three specific outputs only:
- The Avonmouth gas pipeline - this was originally set as an output as there were security of supply risks in decommissioning the Avonmouth LNG storage facility and a new pipeline was seen as being needed to mitigate those risks. NGET have now said that they no longer need to construct a pipeline and can manage the risk through other (much cheaper) means.
- Non-variant allowance outputs for NGET - NGET received over £1.1bn in allowances to cover expected changes in generation and demand. However, fewer generators have connected to the transmission network than was predicted, so not as much work to reinforce the transmission network has been needed.
- Enhanced System Operator role - as a result of last year's Integrated Transmission Planning and Regulation (ITPR) project, NGET was given new obligations to identify the need for investment in the transmission network and coordinate and develop investment options, such as CATOs and in relation to interconnectors. NGET estimate this will cost around £20-£30m to deliver.
Ofgem will consult on any policy proposals resulting from the MPR during summer 2016 for a decision in late autumn 2016 and they aim to make any associated licence changes to be effective from 1 April 2017.
At the same time as they consult on the MPR, Ofgem will also invite views on how the RIIO price control framework is working, looking at: how Ofgem hold the companies to account for their outputs; filling gaps in the RIIO framework particularly in relation to Network Output Measures (NOMs); and improving the focus of discretionary awards and updating the guidance for some mechanisms.
See the Ofgem decision document for more detail.