Owners of Great Britain’s privatised electricity transmission network have expressed disappointment with the level of investment proposed by the regulator Ofgem for the forthcoming price control period.

The electricity transmission grid in Great Britain is the high-voltage network of cables, pylons, overhead lines and substations which transfer vast volumes of electricity across the country, connecting distribution network operators and enduring supply meets demand.

Upgrades to the transmission network are critical because of the UK’s reliance on electrification as a pathway to decarbonisation, meaning electricity demand is increasing. In addition, new sources of generation are expected to come online, in particular new nuclear.

Transmission owners (TOs) published similar statements today (Wednesday 27 August), which said Ofgem’s RIIO-3 Draft Determinations for the Electricity Transmission, Gas Distribution and Gas Transmission sectors did not do enough for “investability”.

Proposed funding will deliver on government’s clean energy plans – regulator

Ofgem director general for infrastructure Akshay Kaul said in his foreword to the draft determinations that the regulator intends to approve investments of more than £80bn across the RIIO-3 period, which will run from 1 April 2026 to 31 March 2031.

“Our RIIO-3 Draft Determinations set out the regulatory arrangements needed to deliver a clean power system by 2030,” he said.

“Capital investment in electricity transmission may exceed £80bn over the RIIO-3 period. Some of this investment is being approved now – with upfront funding to ensure network companies have the confidence to act early, securing supply chains and focusing on rapid delivery.

“The remaining funding will be approved through in-period regulatory mechanisms, once project costs are more certain.”

He added that Ofgem believes the “proposals mark a decisive step in supporting the delivery of a cleaner, more secure energy system – protecting the interests of current and future consumers while keeping costs as low as possible.

“We look forward to engaging with all stakeholders before finalising our decisions later this year.”

Transmission owners say proposals ‘do not go far enough’

TOs National Grid, speaking on behalf of its National Grid Electricity Transmission (NGET) business, and SSEN (Scottish and Southern Electricity Networks), speaking on behalf of SSEN Transmission, complained that the proposed investment is not enough to satisfy their shareholders.

SSEN said: “Ofgem’s Draft Determination does not go far enough to deliver the investible, financeable and ambitious framework required to realise these benefits.”

It added that “to meet investor expectations, Ofgem must raise the baseline Cost of Equity to at least 6.5%, ensuring a credible pathway to 9-10% nominal equity returns competitive with global markets and investor requirements”.

However, the TO did say it “welcomes Ofgem’s recognition of the criticality and unprecedented nature of the RIIO-T3 period in delivering these national objectives and notes there has been some positive movement on Ofgem’s proposed financial parameters, alongside welcoming Ofgem’s approval of need for the majority of investments proposed”.

Meanwhile, National Grid said “the Draft Determination does not sufficiently recognise the practical realities of delivering the biggest expansion of the electricity system in more than a generation and the required two and a half times increase in investment in our transmission network”.

It said it had put forward suggestions to Ofgem which would make RIIO-ET3 (RIIO-Electricity Transmission 3) “investable by creating the conditions required to deliver the unprecedented increase in investment”.

“Changes are needed in relation to the baseline return and the incentives framework to allow high performing networks to achieve a globally competitive overall return,” it added.

National Grid went on to say that “both investability and workability are necessary for transmission owners to be able to meet the commitments put forward in their business plans including accelerating the decarbonisation of the energy system, and cost savings for consumers”.

Both National Grid and SSEN said they would continue to work with Ofgem as it creates its final determination of the investment permitted under the price control period.

SP Energy Networks is the other main TO in Great Britain and had not commented on the draft determinations at the time of publication.

Infrastructure under RIIO-3 ‘can’t be done at any price’ – Ofgem

Reacting to the statements from National Grid and SSEN, an Ofgem spokesperson told NCE: “Ofgem’s draft determinations propose record investment to deliver a homegrown energy system that is better for Britain and better for customers.

“However, this can’t be done at any price, which is why we have built in cost controls and negotiated a fair deal for both consumers and investors.

“We recently consulted on our proposals and are now carefully considering all stakeholder responses, including from network companies and consumer groups and will confirm our final determinations by December.”

Democratisation campaigner says transmission grid should be publicly owned

We Own It executive director Cat Hobbs told NCE that NGET and SSEN’s demand for “investability” means wanting the public to pay for more dividends for shareholders. She also said it is not normal for electricity transmission infrastructure to be privately owned.

“The grid is essential national infrastructure which we all rely on every day. It’s outrageous that it’s not in public ownership – that’s what a majority of voters of all parties want,” she said.

“Every penny from our energy bills should be invested into the infrastructure. Instead, we’re witnessing a tussle between a weak regulator and profit-making monopolies as the rip off continues.

“There’s a huge amount at stake here – our energy security, climate targets and the desperate need to bring down spiraling energy bills.

“Just like the privatised water companies, National Grid and SSEN want to extract as much as possible from the money we pay for essential utilities.

“They are focused on ‘investability’ for shareholders, demanding that Ofgem allows higher returns of at least 6.5% and wanting up to 9-10%.

“Who is paying for these returns? We are. The public, the households who get no choice about the grid which transmits our electricity, which is a natural monopoly.

“It’s not normal to allow private companies to own the transmission network. The UK is almost the only country in Europe with such a privatised grid.

“It doesn’t have to be this way. The last government created the National Energy System Operator, compensating shareholders to take back the planning function of the National Grid.

“This government isn’t considering nationalising the whole grid but they should be. Public ownership would make it easier to upgrade the infrastructure while keeping energy bills low because money for shareholders wouldn’t be leaking out of the system.

“We can’t rely on companies like SSEN, which actually moved operations offshore in 2019 to avoid the threat of public ownership. We need to defend our own interests as consumers, as households, as people who care about the future of this country.”

Like what you’ve read? To receive New Civil Engineer’s daily and weekly newsletters click here.