Republication of RIIO-GT2 Price Control Financial Model following the Annual Iteration Process 2021
Decision
Publication date
Industry sector
Transmission Network
On 30 November 2021, Ofgem published the results of the Annual Iteration Process (AIP), for the National Grid Gas Transmission (NGGT) under the RIIO-2 network price controls. The AIP updates allowed revenues, which licensees must use when setting their charges for the next regulatory year (2022/23).
Part B of Special Condition 8.2 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) after 30 November and before the 05 February prior to each regulatory year.
This re-publication process is set out in Chapter 2 of the GT2 Price Control Financial Handbook and enables NGGT 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 estimated to have a material impact on its allowed revenues.
Since the publication of the AIP in November 2021, there have been material changes to the following variable values in the GT2 PCFM:
System Costs – for the Gas Transmission System Operator, forecast gas prices
The Authority gave NGGT notice of the value of SOARt and SOADJRt on 17 January 2022.
The Authority received one representation from NGGT in response to the notice regarding a further change required to its Net Zero Pre-construction Work and Small Net Zero Projects Re-opener pass-through variable value. This was to include £23.6m of allowance in relation to the SGN LTS Futures project and FEED studies for the Hydrogen Village, which should have been included in the PCFM. We have agreed to reflect this amount in the GT2 PCFM the adjustment represents a reasonable forecast of expected costs and has a material impact on allowed revenue.
The reason for and effect of this re-publication is to revise the PCFM Variable Values to re-calculate the values for the Allowed Revenue and Adjusted Revenue terms for NGGT SO.
The re-published values for SOARt and SOADJRt following the November 2021 AIP are shown within the GT2 Price Control Financial Models published on this page.