Ofgem confirms National Grid spending cut

Ofgem confirms National Grid spending cut

08 August 2017

Channel: Policy & regulation

Ofgem has confirmed a £277.5 million cut to National Grid's gas transmission price control allowance.

The reduction will be made after planned works to upgrade the transmission network to provide capacity at the Fleetwood entry point were scrapped.

National Grid's obligation to provide this capacity was originally triggered by bids for national transmission system entry capacity in September 2006. However, the buyer, a gas shipper called Canatxx, no longer has a right to the capacity after it defaulted on payments.

National Grid later offered the entry capacity at auctions to other parties, at which point another gas shipper successfully bid for 350 GWh/day at Fleetwood for use in one quarter of 2025.

Nevertheless, the gas transmission owner doesn't expect to incur any further expenditure on infrastructure upgrades for the entry point in the current price control, allowing Ofgem to push ahead with the spending allowance reduction.

Ofgem announced its "minded-to" decision on the £277.5m cut in March this year. It had previously issued notification of its intention to review the National Grid's Fleetwood obligations in November 2016 as part of a mid-regulatory period review of network allowances.

National Grid said it had nothing to add to its statement issued at the end of last year, which said a spending allowance reduction "had been anticipated" and was "in line with expectations" at the company.

The mid-period review for gas transmission also hit National Grid with a £168.8m claw-back for costs associated with the construction of a new high pressure gas pipeline in Avonmouth.

This reduction was confirmed in February this year.

DISCUSSION

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Ofgem plans to claw back £277.5 million from National Grid Gas Transmission's (NGGT's) RIIO-GT1 allowance.

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Ofgem has accepted an offer from Cadent to waive £53.9 million of RIIO allowances as part of its mid-period reviews for gas and electricity transmission and gas distribution.

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Ofgem has proposed to cut National Grid’s transmission spending allowance for the current price control period by £185.4 million.

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