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SSEN RIIOT2 consultation response

03 Sep 2020

SSEN Transmission will later today submit a comprehensive response to Ofgem’s draft determination for the RIIO-T2 price control period.

In a detailed and evidence-based submission, which outlines clear and workable solutions throughout, SSEN Transmission will urge the regulator to reconsider the swathing and unjust cuts it has proposed to SSEN Transmission’s stakeholder-led investment plans.  These cuts risk the delivery of net zero emissions, network reliability and security of supply, and jeopardise job creation plans.

Rob McDonald, Managing Director of SSEN Transmission, said:

“Ofgem’s draft determination contained swathing cuts to investment plans, risking the delivery of net zero and severely impacting our ability to maintain a reliable and resilient network.

Our response uses a robust evidence base and captures stakeholders’ views to propose workable solutions to deliver a network fit for net zero. We now look to Ofgem to show the regulatory leadership required to ensure that final determinations deliver, not delay, net zero.

SSEN Transmission recently became the world’s first network company accredited as having a science based greenhouse gas target consistent with a road to net zero – we stand ready to deliver a green economic recovery, but we need the Regulator to make it happen.”

In its detailed response to Ofgem’s consultation, SSEN Transmission has built on its evidence-based, stakeholder-led business plan, complementing it with additional evidence and justification papers supported by third party, independent consultants.  It will also correct several errors in the data and methodologies used by Ofgem in setting allowances.

A significant proportion of Ofgem’s cuts to allowances are due to data and methodology errors. The impact of this would see investments not being fully covered by allowances, risking financial losses.  SSEN Transmission does not believe this to be intended, and therefore fully expects these errors and associated calculations of allowances to be corrected in the final determinations.

As well as specific evidence over the justification of investments, SSEN Transmission will propose constructive and workable changes to the design of the Uncertainty Mechanisms, where initial designs risk delaying the significant investment required to deliver net zero.  Proposals include the need for critical preconstruction activity spend to be put into the baseline allowance, with a clear commitment that any underspend will be returned, in full, to bill payers.  This pre-construction investment is critical to prepare for the energy system of the 2030s, deliver renewable connections and to develop the strategic grid upgrades required to alleviate current and future constraints.  The proposed changes will ensure the regulatory framework keeps pace with net zero.

In the submission, SSEN Transmission will call on Ofgem to ensure final determinations provide sufficient allowances to cover the true costs of operating a growing network and fund future network infrastructure investments. It will also call on Ofgem to ensure its final determinations provide sufficient returns.  The current financial parameters are not commensurate with attracting investment and worryingly, are out of sync with other countries and other comparable regulated businesses.

SSEN Transmission remains optimistic that Ofgem has been listening to stakeholder perspectives since its draft determination.  Ofgem is expected to publish its final determination for the RIIO-T2 period in December.  Given the scale of issues raised, SSEN Transmission asks Ofgem to consider an interim update before the publication of final determinations.

A copy of SSEN Transmission’s response, and all associated supporting evidence, will be published on Friday 4 September at