SSEN Transmission Responds to Ofgem’s Draft Determination on RIIO-T3 Price Controls
In a pivotal moment for the UK’s energy transition, SSEN Transmission has released its response to Ofgem’s Draft Determination regarding the RIIO-T3 price control period. While acknowledging the criticality of infrastructure investment for achieving a cleaner,more secure,and affordable energy system,SSEN Transmission expresses concerns that the current draft falls short of providing the necessary framework to unlock required investment levels [[1]].
Key Concerns with Ofgem’s Draft Determination
SSEN Transmission’s initial assessment highlights several key areas where Ofgem’s Draft Determination requires further consideration:
- Insufficient Baseline Expenditure Allowances: The proposed allowances fail to adequately fund the investment needed for a clean power system by 2030. The methodology doesn’t reflect the actual costs of developing and maintaining a reliable electricity transmission network in northern Scotland [[1]].
- uncompetitive Cost of Equity: The proposed Cost of Equity is not in line with globally competitive market rates, robust market evidence, or the meaningful business risks associated with investing in electricity transmission [[1]].
- Inadequate Capitalisation Rate and asset Lives: The proposed capitalisation rate and asset lives do not provide sufficient cash flow measures, considering the increased uncertainty mechanism expenditure required [[1]].
- Underdeveloped Incentive Regime: The proposed incentive regime is still in its early stages and needs further development to ensure it is a balanced and investable package that incentivizes strong performance and delivers benefits for consumers [[1]].
Did You know? The UK government’s Clean Power 2030 Mission aims to accelerate the deployment of homegrown, low-carbon electricity generation.
SSEN Transmission’s Commitment
Despite thes concerns, SSEN Transmission remains committed to working constructively with Ofgem, the government, and other stakeholders. The goal is to ensure that Ofgem’s Final Determination delivers an investable, financeable, and aspiring price control settlement. This settlement is crucial for underpinning the unprecedented levels of investment needed to create a cleaner,more secure,and affordable energy system for current and future generations [[1]].
RIIO-T3: A Critical Juncture
The RIIO-T3 price control, covering the period from April 1, 2026, to March 31, 2031, is a critical juncture for the UK’s energy infrastructure. SSEN Transmission plans to invest over £22 billion in mission-critical grid infrastructure during this period [[2]]. These investments are essential for achieving net-zero targets and ensuring a reliable energy supply.
Pro Tip: Understanding the RIIO-T3 price control framework is essential for stakeholders in the energy sector, as it directly impacts investment levels and project timelines.
Ofgem’s Accelerated Procurement Model (APM)
Ofgem is also implementing measures like the Accelerated Procurement Model (APM) to expedite infrastructure investment.This model allows for bespoke procurement on a case-by-case basis to assess benefits and risks. The APM is part of a broader effort to enable transmission owners like National Grid, SPEN, and SSEN to accelerate investment both now and through the RIIO-3 framework [[3]].
| Key Area | SSEN Transmission’s Concern | potential Impact |
|---|---|---|
| Baseline Expenditure Allowances | Insufficient funding for clean power system by 2030 | Delayed transition to clean energy, higher consumer bills |
| Cost of Equity | Uncompetitive rates compared to global markets | Reduced investment in electricity transmission |
| Capitalisation Rate and Asset Lives | Inadequate cash flow measures | Increased financial uncertainty for investors |
| Incentive Regime | Underdeveloped and potentially unbalanced | Reduced incentive for strong performance and consumer benefits |
What steps should be taken to ensure sufficient investment in the UK’s energy infrastructure? How can stakeholders collaborate more effectively to achieve net-zero targets?
Evergreen Insights: the Importance of RIIO-T3
The RIIO-T3 (Revenue = Incentives + Innovation + Outputs) price control framework is a regulatory mechanism used by Ofgem to set the allowed revenues for energy network companies in the UK. It aims to incentivize companies to deliver better outputs for consumers, encourage innovation, and operate efficiently.The framework covers various aspects, including investment levels, performance targets, and financial returns. The RIIO-T3 period is notably crucial as it aligns with the UK’s ambitious net-zero targets and the need for significant infrastructure upgrades to support renewable energy sources.
Frequently Asked Questions about RIIO-T3 and SSEN Transmission
- What is the RIIO-T3 price control period?
- The RIIO-T3 price control period covers from April 1, 2026, to March 31, 2031. It is indeed a five-year period during which Ofgem sets the allowed revenues for energy network companies.
- Why is the RIIO-T3 period critically important for the UK’s energy transition?
- The RIIO-T3 period is crucial as it aligns with the UK’s net-zero targets and requires significant infrastructure upgrades to support renewable energy sources and ensure a reliable energy supply.
- What are SSEN Transmission’s main concerns about Ofgem’s Draft Determination?
- SSEN Transmission’s main concerns include insufficient baseline expenditure allowances, an uncompetitive cost of equity, inadequate capitalisation rates and asset lives, and an underdeveloped incentive regime.
- How much does SSEN Transmission plan to invest during the RIIO-T3 period?
- SSEN Transmission plans to invest over £22 billion in mission-critical grid infrastructure during the RIIO-T3 period.
- What is Ofgem’s Accelerated Procurement Model (APM)?
- The Accelerated Procurement Model (APM) is a measure implemented by Ofgem to expedite infrastructure investment by allowing for bespoke procurement on a case-by-case basis.
- What is the UK Government’s Clean Power 2030 Mission?
- The UK Government’s Clean Power 2030 Mission aims to accelerate the deployment of homegrown,low-carbon electricity generation.
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