The Competition and Markets Authority (CMA) has granted permission for Northern Powergrid to appeal changes by Ofgem to their energy licenses.
Following a request on March 2, the CMA said it would allow Northern Powergrid (Northeast) Plc and Northern Powergrid (Yorkshire) Plc permission to challenge modifications to their electricity distribution licences, which affect how much they can charge their customers during the upcoming price period.
Northern Powergrid said the appeal relates to “two specific errors of fact in the Gas and Electricity Markets Authority’s (GEMA) RIIO-ED2 price control determination.”
“The mistakes mean that the terms of the settlement do not properly reflect [Ofgem’s] intended decision and they need to be corrected so that the company can invest the right amount in the network over the next five years to improve reliability, resilience and the service delivered to customers,” Northern Powergrid said in a statement.
Northern Powergrid runs the electricity distribution network in North East England, which affects around 8 million people.
In 2015, Northern Powergrid appealed to the CMA against a previous Ofgem decision to modify two of its licenses. In its ruling, the CMA dismissed two of the three grounds of appeal but “upheld one ground in relation to Ofgem’s adjustments to reflect potential savings available from the introduction of smart grids and other technological innovations. The CMA’s determination will increase NPg’s allowable revenue over the price control period by around £11 million.”
Northern Powergrid said in a press release following that announcement that the CMA had upheld appeal, agreeing that it “was wrong to impose further cost reductions in relation to the deployment of smart grids because the regulator’s decision was not based on robust evidence,” and that the ruling would lead to a small reduction in customer bills between 2015-23.
Approached for comment on the latest news that CMA had granted Northern Powergrid’s appeal, the company reiterated their earlier statement that they were looking to change the price control determination in order to invest more in their network. Northern Powergrid however declined to comment further on the latest news.
RIIO-ED2 (Revenue = Incentives + Innovation + Outputs for electricity distribution) sets the level of investment distribution network operators (DNOs) are allowed to make, and is set to run from 1 April 2023 and 2028. In December 2021, the six DNO’s submitted their final RIIO-ED2 business plans for review by the regulator, which itself then published its draft determinations in June 2022. These determinations were dubbed “tough and stretching”, with a number of clarifications and resolutions identified by the DNOs at the time.
In November 2022, Ofgem gave the go ahead for £22 billion of investment as part of its final package. This was on average -11.8% below that submitted by the operators. Whilst most network operators still welcomed the final determinations, this Northern Powergrid’s concerns will now be evaluated.