Republication of RIIO-GT2 Price Control Financial Model following the Annual Iteration Process 2022
Decision
- Publication date
- Industry sector
- Transmission Network
On 13 December 2022, Ofgem published the results of the GT2 Annual Iteration Process (AIP). The AIP updates allowed revenues, which licensees must use when setting their charges for the next regulatory year (2023/24).
Special Condition 8.2, Part B in the GT licence specifies that the Authority may re-publish the value of Allowed Revenue (ARt), Adjusted Revenue (ADJRt), System Operator Allowed Revenue (SOARt) and System Operator Adjusted Revenue (SOADJRt) by the end of May of each regulatory year.
This re-publication process is set out in Chapter 2 of the GT2 Price Control Financial Handbook and enables NGT to reflect the impact of any unforeseen events on its allowed revenue in time for it to set tariffs, where these events have or are forecast to have a material impact on allowed revenues.
Since the publication of the AIP in December 2022, there has been a material reduction in both TO and SO Allowed Revenues driven by:
TO:
- Strategic Innovation Fund – Actual and forecast values have increased in line with the latest Innovate UK forecast.
- Recovered Revenue – An over-recovery of revenue in 22/23 due to a higher-than-expected throughput of gas in the system and the consequential increase in exit capacity premiums has resulted in lower a 23/24 ARt.
SO:
- System Costs - Actual and forecast costs have fallen due to lower market prices.
- Operating Margin Costs - Actual and forecast costs have risen based on an increased operating margin volume over winter 2022.
- Recovered Revenue - An over-recovery of revenue in 22/23 due to a higher-than-expected exit capacity charges has resulted in lower a 23/24 SOARt.
The Authority gave NGT notice of the value of ARt, ADJRt, SOARt and SOADJRt on 12 May 2023.
The reason for and effect of this publication is to revise the PCFM Variable Values to re-calculate the values for ARt, ADJRt, SOARt and SOADJRt for NGT.
The re-published values for ARt, ADJRt, SOARt and SOADJRt following the December 2022 AIP are shown within the GT2 PCFM published on this page.