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Ofgem's director of networks, Akshay Kaul, fielded questions on the dra determinations on our #AskUsAnything webinar. You can view it on demand at https://utilityweek.co.uk/askusany- thing-riio2-dra-determinations/ 24 | OCTOBER2020 | UTILITY WEEK Policy & Regulation Analysis RIIO2 in the round The summer saw the publication of Ofgem's draft determinations under RIIO2. Tom Grimwood looks at some of the key outcomes and responses, while Maxine Frerk comments on what this all tells us about Ofgem's approach under Jonathan Brearley. Company/Sector Requested Proposed Difference Difference Proposed allowance allowance (£m) (%) yearly (£m) (£m) average (£m) SPT 1,389 970 -419 -30.2 194 SHET 2,388 1,609 -780 -32.6 322 NGET 7,090 3,332 -3,758 -53.0 666 Electricity transmission 10,867 5,910 -4,957 -45.6 1182 NGGT 2,603 1,559 -1,044 -40.1 312 Transmission 13,469 7,469 -6,001 -44.5 1494 Cadent 5,317 4,078 -1,239 -23.3 816 NGN 1,249 1,083 -166 -13.3 217 SGN 3,058 2,527 -531 -17.4 505 WWU 1,182 997 -185 -15.7 199 Gas distribution 10,806 8,685 -2,121 -19.6 1737 Overall total 24,275 16,154 -8,122 -33.5 3231 What the regulated said: Keith Anderson, CEO, Scottish Power: "We're sitting and asking ourselves how could we have ended up here where I'm being told by a govern- ment spend, invest, go faster, do more, create jobs, and I end up with a regulatory process that says slow down, cut, pin it back, don't do it all; and it's like the two processes are separately and indepen- dently of each other." Rob McDonald, managing director of transmis- sion, Scottish and Southern Electricity Networks: "While our stakeholder-endorsed and evidence-based business plan was in step with the government's low carbon investment ambition, Ofgem's first pass at a settlement resembles a worrying return to auster- ity. Ofgem's dra determination is a barrier towards achieving net zero and damaging to the green eco- nomic recovery." What the regulators said: Akshay Kaul, director of networks, Ofgem: "The very foundation of the design of this control is to get to net zero at lowest cost. If you study the proposals carefully, what we're essentially saying is that there is potentially unlimited funding avail- able for good value net zero projects." Jonathan Brearley, CEO, Ofgem: "Part of getting this regime right – part of driving efficiency, getting the right rate of return – is that people know money really is going to green infrastructure and don't feel it's been taken away for other reasons. And that's really important if we're going to get this long-term plan in place." What the investors said: Peter Antolik, Arjun Infrastructure Partners: "The returns regulators are offering are fine for day-to-day investments, but if you really want companies to start to employ greater amounts of innovation, they want to know that they will have access to either certainty of funding or greater rewards for taking those risks." Gas transmission/distribution: 3.95% National Grid Electricity System Operator: 5.28% Electricity transmission: 3.7% ALLOWED RETURN ON EQUITY The Big Numbers £3.3bn – Cut in returns compared to current price control £16bn – Baseline totex allowance agreed by Ofgem £8bn – Baseline totex allowance refused by Ofgem £10bn – Additional investment available as part of a net zero reopener Total investment allowed by Ofgem for the 2021 -26 period: £25bn