Ofgem Releases Network Price Control Outcomes
Britain’s energy regulator Ofgem has published its 2016/2017 annual reports on how well energy network companies performed under their regulatory price controls. The four reports set this out in distribution and transmission, for both gas and electricity.
Ofgem says its price controls protect customers by setting the revenue allowances that de facto monopoly network companies can earn, using the revenue = incentives+innovation+outputs (RIIO) approach to reward or punish companies that would otherwise be rewarded or punished by the market.
Under its gas transmission report, sole operator National Grid Gas Transmission (NGGT) “met most of its annual output targets except for two,” said Ofgem. It missed its greenhouse gas emissions target in part because higher volumes of gas arrived at the St Fergus gas terminal which caused the increased usage of its compressor fleet.” NGGT was penalised £1mn for missing that target.
NGGT also missed a reliability and availability target, relating to its obligation under the European Network Code to run daily capacity auctions. During 2016-17, IT system issues prevented a small number of these from running. In each case the relevant capacity was rolled to the next auction.
Energy Networks Association (ENA) chief executive David Smith said that with “a halving of the number and length of power cuts since 2002 and costs that are down 17% since privatisation and in recent years are either stable or falling, today's annual reports are proof Britain's energy network companies are delivering for households, businesses and communities. We're pleased that Ofgem recognises the hard work and strong performance made by all network companies,” Smith added. ENA represents network operators.
ENA added that network charges in year 2016-17 (to April 2017) on the average household energy bill were some 3% (£9.50) lower, than in 2015-16, and set to stay flat in the current year to April 2018. It said the average network charges in both 2016-17 and 2017-18, calculated from Ofgem data, would be £123.60 for electricity and £127.80 for gas, for a combined total of £251.40.
Keeping network charges down had been achieved, it added, despite more than 50,000 gas customers being connected to the mains gas grids since 2013; and over 2.8 gigawatts of small scale units such as solar farms becoming grid-connected during the year to April 2017, up 60% on the previous year.
The opposition Labour Party went into the June 2017 election saying that National Grid and other energy networks had not reinvested enough in infrastructure, which they dispute, and said it would renationalise some including NGrid – which NGrid’s CEO said would have made no sense. Ofgem regulates Britain only; a separate regulator administers the UK region of Northern Ireland.