Utility Week

UTILITY WEEK | APRIL 2021 | 15 Policy & Regulation Analysis Networks and Ofgem set for CMA showdown All eight gas and transmission networks are appealing to the CMA against Ofgem's final determinations on their RIIO2 business plans. Utility Week summarises the key arguments and the challenges they pose for the CMA. A er months of speculation, all the electricity and gas transmission and gas distribution networks have decided to challenge at least some elements of their settlement from Ofgem for the 2021- 2026 price control, RIIO2. The only company to accept its final determination in full is National Grid Elec- tricity System Operator. National Grid was the first to make an announcement, on 2 March. The group said the appeals it is requesting for electricity and gas transmission would be technical in nature and limited to the cost of equity and the so-called outperformance wedge. The electricity transmission arms of Scottish and Southern Electricity Networks (SSEN) and then SP Energy Networks (SPEN) followed that aernoon. SSEN said its request would also be "narrow and technical in scope", focusing on areas where "Ofgem's decision does not reflect the robust evidence provided throughout the price control pro- cess, alongside material errors". SPEN said it was "concerned at Ofgem's approach on a number of discrete issues". Cadent was the first of the gas distribu- tion networks to announce it was seeking an appeal, on 3 March. It said its request would cover the rate of return for investors as well as total expenditure allowances and risk. Chief strategy and regulatory officer Tony Ballance said: "This is because we do not believe the final determination strikes the right balance between bill reductions and future investment that is necessary to enable continued overleaf us to deliver the very best service to custom- ers and wider society." SGN explained that it would be look- ing to appeal the cost of equity, the outper- formance wedge and aspects of Ofgem's efficiency methodology. Wales and West Utilities (WWU) said its request would cover five areas: the cost of debt; the cost of equity; spending allowances for gas mains replacement efficiency targets; and the construction of the licence. Northern Gas Networks said its challenge would cover four issues: the cost of equity; the outper- formance wedge; efficiency targets; and the level of incentives. As anticipated, the main point of conten- tion is the cost of equity – the baseline rate

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