OFGEM Requests by networks for adjustments to funding (1720X)

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RNS Number : 1720X

OFGEM

08 August 2018

8 August 2018

Ofgem consults on requests by network companies for adjustments to funding

-- Ofgem will allow network companies to recover an additional GBP90 million including funding to tackle cyber and physical security threats

-- Ofgem proposes to refuse National Grid's requests to recover around GBP263 million from consumers for replacing a pipeline and maintaining gas compressors

-- Ofgem proposes to allow National Grid around GBP116 million for undergrounding existing electricity cables in an area of outstanding natural beauty in Dorset.

Ofgem is consulting on requests by several energy network companies for adjustments in funding under the price controls it sets.

Network companies can apply for additional allowances to cover any extra costs for the current price controls which had not been forecast when they were set.*

The regulator has set out its initial views on these requests and final decisions will be made in September.

Ofgem is consulting on requests to allow National Grid, Wales and West Utilities and Cadent to pass on an additional GBP144 million of costs for improving resilience to physical and cyber security threats, managing street works, and compensating landowners for work on gas pipelines. Ofgem has reduced the additional amount it intends to allow to GBP90 million.

National Grid have also requested additional funding to pass on around GBP263 million of costs to consumers for replacing a gas pipeline across the Humber estuary, and maintaining gas compressors.

Ofgem's initial view is that National Grid has not demonstrated that replacing the pipeline across the Humber estuary would be in the best interests of consumers. Ofgem is therefore not persuaded that it should allow National Grid's request to pass the GBP140 million replacement cost on to them.

National Grid uses gas compressors to send gas through the national gas pipeline system. Ofgem plans to reject the vast majority of the company's request to pass on GBP123 million costs that it claims are needed to ensure that nine compressor sites comply with the European Industrial Emissions Directive.**

Ofgem believes some of the works are already funded by the price control and that in other areas the investment National Grid wants to make does not relate to ensuring the compressors are compliant with the Directive.

Separately, Ofgem is consulting on National Grid's proposal of around GBP118 million to place almost 9km of electricity cables underground in the Dorset Area of Outstanding Natural Beauty (AONB). Ofgem allows electricity network companies to make the necessary investment to reduce the visual impact of existing power lines if it is in the interests of consumers.

Ofgem considers that the cost could be cut by over GBP2 million as National Grid has not justified some of the expenditure. Ofgem will make a final decision on the costs it will allow National Grid to recover this autumn. The work could then be completed April 2022.

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Notes to Editors

1.Links to the consultation documents published today are available in Ofgem's publications library: www.ofgem.gov.uk/publications-library

2. *Ofgem sets four price controls (for gas transmission, electricity transmission, gas distribution and electricity distribution). Both the transmission and gas distribution price controls run from 2013 to 2021. The electricity distribution price controls run from 2015 to 2023.

National Grid Gas Transmission owns the high pressure gas mains in Great Britain. National Grid Electricity Transmission owns the high voltage electricity grid in England and Wales. Cadent, and Wales and West Utilities are owners of some of Britain's eight gas distribution networks. See more information about the price controls and energy networks

here: https://www.ofgem.gov.uk/system/files/docs/2018/06/ofg1050_riio_fast_facts_web.pdf

The pipeline National Grid Gas wants to replace runs across the Humber Estuary, taking gas linking the Easington gas terminal with the national high pressure gas system.

3 ** The Industrial Emissions Directive is European legislation which sets limits on emissions on gas compressors. National Grid Gas must undertake works to ensure its fleet of compressors are compliant with the requirements. In some cases National Grid has not yet decided on the best solution for ensuring that its compressors comply with the Directive. Ofgem wants to wait until this is clearer, before looking again at National Grid's request. This is most likely to be in the next gas transmission price control from 2021.

Further information

For media, contact:

Chris Lock: 0207 901 7225

Media out of hours mobile: 07766 511470 (media calls only)

For investors, contact:

Martin Young: 0207 901 7114

About Ofgem

Ofgem is the independent energy regulator for Great Britain. Its priority is to make a positive difference for consumers by promoting competition in the energy markets and regulating networks.

For facts, figures and information about Ofgem's work, see Energy facts and figures or visit the Ofgem Data Portal.

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This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

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