National Grid to lose £185.4m in mid-period spending review
Ofgem has proposed to cut National Grid’s transmission spending allowance for the current price control period by £185.4 million.
18th August 2016 by Networks
The cuts, which will impact National Grid’s gas and electricity transmission businesses, come off the back of a mid-price control spending review for the period 2013-2021. The review was launched in May this year.
After investigation, Ofgem has decided that National Grid no longer needs to undertake its planned gas pipelines project at Avonmouth and so wants to cut its gas transmission spending allowance by £168.8m.
Similarly, in electricity transmission, Ofgem has found that a range of planned fault protection work is no longer required due to fewer than expected generators connecting to the high voltage grid. The regulator therefore proposes to cut spending in this area by £38.1m.
In addition to these cuts, Ofgem’s mid-period review is also set to award some additional spending allowance to National Gird. The regulator has proposed to allocate an extra £21.5m for spending on projects relating to system planning and the new challenges for the high voltage grid arising from growing supply and demand balancing pressures.
Overall, the cuts and the proposed additional spending allowance ammount to a reduction of £185.4m for National Grid.
In response to Ofgem’s announcmeent of its intentions, National Grid issued an official statement saying that the “narrow” mid-period review made no difference to the “key finacial parameters of the [regulatory] framework” – at fact which it welcomed.
The transmission sysem operator was also keen to emphasize that it beleives the “RIIO regime is delivering for consumers,” and that Ofgem’s proposed spending reductions have been made possible by internal efficiencies at National Grid and by smarter ways of working.
“We are delivering the necessary infrastructure to support the UK. Where we are outperforming we are sharing these savings with the consumer,” a National Grid spokesperson told Network.
A final decision from Ofgem on whether to go ahead with these changes to the price control spending agreements will be made in the autumn and will take effect from April 2018.
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