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‘Significant differences’ between National Grid ESO’s tendering and CATO needs, finds report

Image: Andy Beecroft.

Image: Andy Beecroft.

National Grid ESO has released an update on its Early Competition Plan (ECP), ahead of the implementation of Ofgem's Competitively Appointed Transmission Owners (CATO) legislation.

The role that National Grid ESO will play in CATO appears uncertain from the report, as it does not currently tender for the construction of assets, and therefore there are “significant differences” between its activity and the processes and capabilities needed to run a CATO-type competition.

These need to be addressed, the report says, although it does express its support for CATO: “We are fully supportive of the introduction of competition where it is in the interest of consumers and we welcome the opportunity to help shape this. This area of work has a strong correlation with our ambition of ‘Competition Everywhere'".

By next year, the ESO has pledged to produce a paper looking at what its role should be within distribution level competition.

The report evaluates phase one of the ECP, within which the operator created models of early competition scenarios, concluding that competition could be introduced very early, prior to the initial design of a possible solution, and after a possible initial design has been produced. As such it will continue to develop an approach that allows both early and very early competition.

Additionally, the system operator looked into the tendering process, such as the inclusion of shortlisting bidders and post-tender change mechanisms, as well as whether design would need a separate competition. It concluded that design sat better within the overall competition framework, and so a design-only model is not required.

It looked into whether its Network Development Roadmap pathfinder approach should be expanded to cover large scale transmission investment projects, but concluded that the existing pathfinders were sufficient.

The report promised four deliverables by February 2021. These were; a plan for the implementation of Early Competition, which will be developed through a fair and transparent process, proposals for an end to end Early Competition Process, proposals for appropriate ESO funding and performance, and crucially the paper looking at ESO’s role in distribution level competition.

The ECP is designed to evaluate whether early or late competition should be adopted and in what circumstances. It will be combined with Ofgem’s own thinking on late competition to inform CATO.

The CATO regime, which forms part of the Integrated Transmission Planning and Regulation (ITPR) project, is being designed to drive innovation and reduce the costs passed on to the consumer.

Last September, National Grid ESO appealed to the industry for feedback on CATO, asking how tenders could be launched and how ongoing uncertainty is best managed, with the aim of making its proposed model "simple and accessible" it said at the time.

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