Ofgem published its Draft Determination on the business plan of Scottish and Southern Electricity Networks Distribution (SSEN Distribution), part of the SSE Group, for the RIIO-ED2 price control period on 29 June 20221. The company said the initial determination is "tough and stretching" and represents an increase of 18% on its equivalent allowances in RIIO-ED11.
SSEN Distribution said the draft recognises the innovation proposed through additional Customer Value Propositions, but that work is required to ensure the final settlement fully reflects customer and stakeholder needs1. It said this includes further refinement to allow for delivery of improvements in infrastructure and the deployment of technologies required to reach net zero and build network resilience in the context of climate change1. The company also noted the proposed allowed cost of capital, which it said it will continue to review against the context of prevailing market conditions1.
The business plan was co-created with over 25,000 stakeholders in what SSE described as its largest ever engagement exercise, and SSEN Distribution said it is underpinned by evidence supporting investment to deliver a network ready for net zero, drive technological change and improve network resilience, with no planned increases to network charges on consumer bills1.
"This is the first step in the determination process and SSEN Distribution will now take time to review the full detail of the Draft Determination and constructively engage with Ofgem to ensure a progressive conclusion is reached in the interest of customers and other stakeholders at Final Determination later this year."
RIIO-ED2 is the price control framework that sets what electricity distribution network operators can spend and recover through network charges, the part of a household bill that pays for the local wires delivering electricity. The Draft Determination is Ofgem's initial view of SSEN Distribution's plan; the company's response indicates the figures are not settled.
Why it matters for households
The allowances in the determination shape how much distribution networks can invest in the poles, wires and substations that connect homes, and how much of that cost is recovered through bills. SSEN Distribution said its plan contains no planned increases to network charges on consumer bills1, but the 18% figure refers to the company's allowances relative to RIIO-ED1, not to a household bill outcome, and the final settlement has not been set. The company's stated concerns about infrastructure delivery, net zero technologies and resilience are the areas where the final numbers could change1. The proposed allowed cost of capital, which SSEN Distribution said it will review against market conditions, is a further open point1. For a household, the practical link is that network investment funded through regulation and policy ultimately sits inside the standing charge and unit rate, so the level agreed at Final Determination is the one that matters for bills.
What happens next
SSEN Distribution said it will review the full detail of the Draft Determination and engage with Ofgem, with a Final Determination expected later in 20221. No date for the Final Determination has been reported.