Citizens Advice published its response to Ofgem's initial policy consultation on the proposed Opex Escalator (OE) Review Mechanism on 23 September 20241. The consumer body said it does not support the proposal as it stands.
The consultation concerns the opex escalator within RIIO-T2, the price control framework for electricity transmission. Citizens Advice set out its position in a written response, also published as a PDF document of 263 KB1.
The organisation's central objection is to the design of the mechanism rather than to the principle of reviewing costs. It said the proposal would "introduce a mechanism that isolates one component of the price control and can only be used, if successful, to increase allowances"1. In its view, that asymmetry means the mechanism cannot reduce allowances where companies have been over funded.
"Citizens Advice does not believe Ofgem's current proposal to introduce the review mechanism for the opex escalator for RIIO-T2 is in the interests of consumers."
Citizens Advice argued that the same price control process that creates a risk of under funding also creates a risk of over funding, and that both should be treated the same way. It said "there are also equivalent risks to consumers that companies have been over funded elsewhere due to the inherent nature of price controls", and that "Ofgem should, instead, approach the risks of under funding and over funding, equitably"1.
The response does not set out alternative allowance figures, nor does it state what proportion of network costs the opex escalator covers. Those details have not been reported in the published response summary1.
Why it matters for households
Transmission network costs are recovered through household electricity bills, so the rules that decide whether a network company's allowances rise feed through to what homes pay. A mechanism that can only increase allowances, as Citizens Advice describes the proposal, would place the risk of cost increases on bill payers while leaving no matching route to return money if a company was funded above its needs1. For a household, the practical question is whether the framework that sets these allowances is symmetrical: whether the same process that can add cost can also take it away. The outcome of this consultation therefore bears on the portion of a bill that households cannot shop around for, unlike the supply element they can switch. How such consultations work, and where consumer bodies such as Citizens Advice sit in the process, is set out in the site's guide to energy consultations.
What happens next
No date for Ofgem's decision on the proposed Opex Escalator Review Mechanism has been reported1.