Energy network revenue adjusted in annual iteration process
Press release
Publication date
Industry sector
- Distribution Network
- Transmission Network
Ofgem has today published the 2016 annual iteration process (AIP) for energy network operators (NWOs) under the RIIO price controls. The AIP updates base revenues for all sectors for the next regulatory year (2017/18). We have also published updated price control financial models (PCFMs).
Ofgem sets price controls for the electricity and gas transmission, and electricity and gas distribution networks under the Revenue = Incentives + Innovation + Outputs (RIIO) framework. As part of this we make annual adjustments to the revenue we allow networks to collect.
The impact of this year’s AIP has reduced the allowed revenue that Network Operators NWOs will collect from customers over the next regulatory year by £510.5 million (2017/18 Prices). This reduction is driven by three factors:
- Downward adjustments to allowances – largely as a result of expected spending not being required in electricity transmission (these amounts are fully returned to consumers).
- Lower interest rates in debt markets and therefore a lower cost of debt allowance (these amounts are fully returned to consumers).
- NWOs requiring less spending to deliver outputs (these savings are shared with consumers).
Our annual reports on the gas transmission, electricity transmission, gas distribution and electricity distribution price controls will be published in December and January, and will show our analysis of these factors and NWOs’ performance in more detail.
Ofgem’s price controls provide a long term stable investment framework for networks while minimising costs for consumers. Ofgem continues to monitor networks’ performance closely.
Notes to editors
1. The four Price Control Financial Models.
- RIIO T1 Financial Model (Electric)
- RIIO GD1 Financial Model
- RIIO T1 Financial Model (Gas)
- RIIO ED1 Financial Model
2. See an explanation of Ofgem’s network price controls and its role in network regulation.
About Ofgem
Ofgem is the independent energy regulator for Great Britain. Its priority is to make a positive difference for consumers by promoting competition in the energy markets and regulating networks.
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