SSEN Transmission responds to Ofgem’s RIIO-T3 Draft Determination session

SSEN Transmission has formally responded to Ofgem’s Draft Determination for the RIIO-T3 worth management interval, setting out the adjustments required to unlock the unprecedented degree of funding required to fulfill the nation’s power ambitions.

Investment within the electrical energy transmission community is the important thing enabler to reaching UK and Scottish Government power safety, clear energy and web zero ambitions.

Extensive evaluation included in SSEN Transmission’s Business Plan confirms this funding can be anticipated to carry down client prices by enabling the fast deployment of homegrown, low-carbon, electrical energy era.

SSEN Transmission welcomes Ofgem’s recognition of the criticality and unprecedented nature of the RIIO-T3 interval in delivering these nationwide goals and notes there was some optimistic motion on Ofgem’s proposed monetary parameters, alongside welcoming Ofgem’s approval of want for almost all of investments proposed.

However, Ofgem’s Draft Determination doesn’t go far sufficient to ship the investible, financeable and bold framework required to grasp these advantages.

In an in depth and evidence-based response, SSEN Transmission has known as for adjustments in 4 key areas to ship clear energy, power safety and decrease payments for present and future generations:

1. An acceptable and investable monetary framework

• An Investable framework: To meet investor expectations, Ofgem should elevate the baseline Cost of Equity to no less than 6.5%, guaranteeing a reputable pathway to 9-10% nominal fairness returns aggressive with world markets and investor necessities.
• Strengthened money circulate measures: This consists of mixture capitalisation charges of not more than 80% and asset lives of 35 years for brand new property to adjust to Ofgem’s beforehand acknowledged investability dedication.

2. A significant incentive framework:

• Credible Incentives: A extra sturdy incentive bundle is required to supply a reputable alternative for well-performing networks, in any other case the baseline return will have to be elevated accordingly to fulfill investor expectations and assist investability of the general worth management.

• Business Plan Incentive (BPI): Ofgem has incorrectly utilized the BPI to overheads and used unreliable fashions for comparisons. Ofgem should standardise the way it assesses oblique prices earlier than introducing penalties or rewards.

3. A totally funded plan:

• Ofgem should handle funding shortfalls to baseline whole expenditure and be sure that oblique sources are correctly aligned with Clean Power 2030 and web zero goals.

• Benchmarking strategies ought to mirror the size of progress to 2031 with much less emphasis on historic tendencies. Ofgem ought to revise its value evaluation fashions and their utility to account for company-specific circumstances and unprecedented progress.

4. Rapid regulatory resolution making

• To keep away from lacking Clean Power Action Plan and Net Zero targets, Ofgem ought to streamline and automate approvals for all Clean Power 2030 aligned schemes and the related enabling works.

• Release of Funding. Ofgem ought to transfer away from reopeners and automate funding to match precise undertaking calls for, with funding for preconstruction and early enabling works launched in full.

SSEN Transmission will proceed to work constructively with Ofgem to make sure the regulator’s Final Determination delivers an investible, financeable and bold worth management settlement which underpins the unprecedented ranges of funding required.