Letter to Ofgem on a potential mid-period review for RIIO-ED1
Citizens Advice would support the use of an ED1 mid-period review that focussed on resolving the problems of over-remuneration identified in our recent report, Consumers Missing Billions [ 0.88 mb], which is appended to this submission.
Consumers Missing Billions identified deficiencies in the parameterisation of five key aspects of the ED1 settlement:
The cost of equity;
The risk free rate;
The equity beta;
The cost of debt; and
The calibration of incentives, including on totex.
If unchecked, these deficiencies will result in consumers bearing the costs of significant excess profits that are entirely unjustified, unreflective of performance and in excess of what is required to stimulate investment in the sector. They may also undermine the credibility and durability of the regulatory regime.