Owners of Great Britain\u2019s privatised electricity transmission network have expressed disappointment with the level of investment proposed by the regulator Ofgem for the forthcoming price control period.<\/p>\n
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.<\/p>\n
Upgrades to the transmission network are critical because of the UK\u2019s 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.<\/p>\n
Transmission owners (TOs) published similar statements today (Wednesday 27 August), which said Ofgem\u2019s RIIO-3 Draft Determinations for the Electricity Transmission, Gas Distribution and Gas Transmission sectors did not do enough for \u201cinvestability\u201d.<\/p>\n
Proposed funding will deliver on government\u2019s clean energy plans \u2013 regulator <\/p>\n
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 \u00a380bn across the RIIO-3 period, which will run from 1 April 2026 to 31 March 2031.<\/p>\n
\u201cOur RIIO-3 Draft Determinations set out the regulatory arrangements needed to deliver a clean power system by 2030,\u201d he said.<\/p>\n
\u201cCapital investment in electricity transmission may exceed \u00a380bn over the RIIO-3 period. Some of this investment is being approved now \u2013 with upfront funding to ensure network companies have the confidence to act early, securing supply chains and focusing on rapid delivery.<\/p>\n
\u201cThe remaining funding will be approved through in-period regulatory mechanisms, once project costs are more certain.\u201d<\/p>\n
He added that Ofgem believes the \u201cproposals mark a decisive step in supporting the delivery of a cleaner, more secure energy system \u2013 protecting the interests of current and future consumers while keeping costs as low as possible.<\/p>\n
\u201cWe look forward to engaging with all stakeholders before finalising our decisions later this year.\u201d<\/p>\n
Transmission owners say proposals \u2018do not go far enough\u2019 <\/p>\n
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.<\/p>\n
SSEN said: \u201cOfgem\u2019s Draft Determination does not go far enough to deliver the investible, financeable and ambitious framework required to realise these benefits.\u201d<\/p>\n
It added that \u201cto 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\u201d.<\/p>\n
However, the TO did say it \u201cwelcomes Ofgem\u2019s 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\u2019s proposed financial parameters, alongside welcoming Ofgem\u2019s approval of need for the majority of investments proposed\u201d.<\/p>\n
Meanwhile, National Grid said \u201cthe 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\u201d.<\/p>\n
It said it had put forward suggestions to Ofgem which would make RIIO-ET3 (RIIO-Electricity Transmission 3) \u201cinvestable by creating the conditions required to deliver the unprecedented increase in investment\u201d.<\/p>\n
\u201cChanges are needed in relation to the baseline return and the incentives framework to allow high performing networks to achieve a globally competitive overall return,\u201d it added.<\/p>\n
National Grid went on to say that \u201cboth 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\u201d.<\/p>\n
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.<\/p>\n
SP Energy Networks is the other main TO in Great Britain and had not commented on the draft determinations at the time of publication.<\/p>\n
Infrastructure under RIIO-3 \u2018can\u2019t be done at any price\u2019 \u2013 Ofgem <\/p>\n
Reacting to the statements from National Grid and SSEN, an Ofgem spokesperson told NCE: \u201cOfgem\u2019s draft determinations propose record investment to deliver a homegrown energy system that is better for Britain and better for customers.<\/p>\n
\u201cHowever, this can\u2019t be done at any price, which is why we have built in cost controls and negotiated a fair deal for both consumers and investors.<\/p>\n
\u201cWe 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.\u201d<\/p>\n
Democratisation campaigner says transmission grid should be publicly owned<\/p>\n
We Own It executive director Cat Hobbs told NCE that NGET and SSEN\u2019s demand for \u201cinvestability\u201d 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.<\/p>\n
\u201cThe grid is essential national infrastructure which we all rely on every day. It\u2019s outrageous that it\u2019s not in public ownership \u2013 that\u2019s what a majority of voters of all parties want,\u201d she said.<\/p>\n
\u201cEvery penny from our energy bills should be invested into the infrastructure. Instead, we\u2019re witnessing a tussle between a weak regulator and profit-making monopolies as the rip off continues.<\/p>\n
\u201cThere\u2019s a huge amount at stake here \u2013 our energy security, climate targets and the desperate need to bring down spiraling energy bills.<\/p>\n
\u201cJust like the privatised water companies, National Grid and SSEN want to extract as much as possible from the money we pay for essential utilities.<\/p>\n
\u201cThey are focused on \u2018investability\u2019 for shareholders, demanding that Ofgem allows higher returns of at least 6.5% and wanting up to 9-10%.<\/p>\n
\u201cWho 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.<\/p>\n
\u201cIt\u2019s 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.<\/p>\n
\u201cIt doesn\u2019t have to be this way. The last government created the National Energy System Operator<\/a>, compensating shareholders to take back the planning function of the National Grid.<\/p>\n \u201cThis government isn\u2019t 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\u2019t be leaking out of the system.<\/p>\n \u201cWe can\u2019t 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.\u201d<\/p>\n