Statutory Consultation to modify price control financial models to account for the London medium pressure refund and the National Grid voluntary allowance deferral

Publication date
4th July 2017
Closing date
1st August 2017
Policy areas
Status

We are consulting on the implementation of two of our recent decisions to modify allowances within the RIIO-ET1 and RIIO-GD1 network price controls made as part of separate processes. These two decisions were:

  1. Our acceptance of the National Grid offer to defer voluntarily a total of £480m of their allowances with respect to non-variant load and asset replacement expenditures.
  2. Our decision, made in our mid-period review parallel work process, to accept Cadent’s offer to refund consumers £53.9 million for work to replace medium pressure iron mains in central London, which Cadent has partly delayed to future price controls.

We propose to revise our PCFMs to reflect the refund and deferral in the companies’ allowances. We intend for these PCFM revisions to be decided on in time for their inclusion in the next price control Annual Iteration Process, due to conclude 30 November 2017.

The revenue reductions associated with these PCFM modifications will be realised over many years into the future. In the nearer-term, we estimate that these changes will reduce revenue by £101m and £13m for RIIO-ET1 (2019/20 to 2020/21) and RIIO-GD1 (2018/19 to 2020/21) price controls, respectively.