Republication of RIIO-GT2 Price Control Financial Model following the Annual Iteration Process 2023
Decision
- Publication date
- Industry sector
- Transmission Network
On 30 January 2024, 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 (2024/25).
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 January 2024, there has been a material reduction in SO Allowed Revenues driven by:
- System Costs – Actual and Forecast costs have fallen due to lower market prices.
- Operating Margin Services - Actual and forecast costs have fallen due to cost avoidance and contract values being set for the year ahead.
- Non-operational IT – Allowances for this re-opener have risen following an Ofgem direction published on 31 January 2024.
- Recovered Revenue – An under-recovery of revenue in 23/24 due to lower local distribution zone demand and gas flows than forecast has resulted in a higher 24/25 SOAR. This under-recovery lessens the overall material reduction to 24/25 SOAR driven by System Costs and Operating Margin Services.
The Authority gave NGT notice of the value of ARt, ADJRt, SOARt and SOADJRt on 13 May 2024.
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 January 2024 AIP are shown within the GT2 PCFM published on this page.