RIIO-ED2 Final Determinations – a Dickens approach?

Ofgem, like Ebeneezer Scrooge, may well feel haunted right now. The Ghosts of Christmases (or price-controls) Past, Present and Future seem to have been reflected in the RIIO-ED2 final determinations:

• The Ghost of Christmas Past suggests that Ofgem have been too generous with allowances and incentives at the cost of the consumer in previous price controls
• Ghost of Christmas Present reflects the cost of living crisis now. Ofgem have reduced network allowances by ~12%, and pushed expenditure into uncertainty mechanisms (now 37 separate mechanisms, 19 of which are automatic), which helps to keep bills lower than the previous price control at the start of the new period
• Ghost of Christmas Future is a reminder of the need to deliver Net-Zero outcomes. Ofgem have introduced mechanisms to allow access to significant amounts of additional expenditure that increase the likelihood of consumer bill increases throughout the RIIO-ED2 period

The result is a price control determination that represents the political reality of today.?Ofgem have covered all bases providing an initial cost reduction for consumers, a flexible approach in period to continue progress towards Net-Zero goals and less opportunity for excess returns for network operators.

Whilst this appears to be shrewd this may be passing unwanted gifts including likely consumer bill increases throughout the period and huge complexity in managing and overseeing the RIIO-ED2 period for networks and the regulator. Is this passing on today’s pain onto tomorrow’s consumer?

Let’s all hope that time reveals that Ofgem have got the balance right and the industry has the right people, technology and supply chain in place to respond to the challenge and deliver on commitments. Then we will see if the RIIO-ED2 final determinations are indeed, to quote Dickens, a “fair, even-handed, noble adjustment of things”.

Written by Allan Boardman CEng , James Veaney , Nicholas Cass-Tansey from PA Consulting