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Citizens Advice response to Ofgem RIIO-ED2 Methodology Consultation

8 October 2020

This submission responds to the Ofgem RIIO-ED2 Methodology Consultation which relates to the price control for 2023-28 for the 6 Distribution Network Operator (DNO) companies of Great Britain (GB). The RIIO-ED2 (ED2) Sector Specific Methodology Consultation (SSMC) invites views regarding Ofgem’s current intentions and ideas for the DNO price control.

There are 4 submissions in response to the ED2 SSMC. We would advise reading the Executive Summary and General Comments sections in the first Overview section before reading the second, third and fourth submissions, as the first submission frames the later question responses.

The electricity distribution network companies that deliver electricity through their wires to our homes and businesses provide an essential service. The DNOs are custodians of national infrastructure and have a privileged role in serving GB’s consumers. 

Ofgem has a series of key tasks for the ED2 price control and must do them well to ensure that the DNOs are able to do their job in maintaining the electricity network and developing it to meet the needs of Net Zero. We believe that Ofgem will need to:

  • Ensure that this price control avoids some of the errors of ED1 and cuts over-generous funding, particularly for cost of capital

  • Show how consumer evidence has been used in their decisions. The previous RIIO-2 price control hasn’t shown how Ofgem used the extensive stakeholder input that built the company’s Business Plans

  • Put in the building blocks and a timeline to gather evidence to determine whether Distribution System Operation (DSO) functions, which make the system smarter and more cost-effective, should be separate from the DNOs to avoid potential conflict problems

  • Foster better collaboration between the DNOs, particularly for the newer DSO functions, to ensure that the electricity system is cost-effective and duplication of effort is avoided         

  • Only provide funding for strategic investments, which are the investments made when the DNOs are developing the network much earlier than normal, using a high degree of scrutiny using robust forecasting evidence and mechanisms to minimise over-spending

  • Take on board the impacts that COVID-19 might have on the future demand for electricity and the ability of people to fund new investment

  • Maintain focus on the needs of those with vulnerabilities that may require additional support from their DNOs, especially in the transition to a new electricity system

ED2 Methodology Consultation response - Overview section [ 440 kb]

ED2 Methodology Consultation response - Annex 1 section [ 320 kb]

ED2 Methodology Consultation response - Annex 2 section [ 240 kb]

ED2 Methodology Consultation response - Annex 3 section [ 1.6 mb]