National Grid Submits Draft Business Plan For New Ofgem Price Controls

(Alliance News) - National Grid PLC on Tuesday submitted draft business plans for the new RIIO-T2 ...

Alliance News 2 July, 2019 | 8:10AM
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(Alliance News) - National Grid PLC on Tuesday submitted draft business plans for the new RIIO-T2 price controls in the UK, covering the five years from April 2021.

The plans cover electricity and gas transmission and have been submitted to the energy supplier's independent user groups and to Ofgem's RIIO02 Challenge Group.

"These are initial plans to invite feedback from a range of stakeholders on the possible investments that could be made in the five years commencing April 2021. We have a critical role in the rapid change in our energy systems during this period, reducing carbon emissions significantly and delivering long-lasting benefits for consumers and society, whilst maintaining highly reliable and resilient networks," said National Grid.

In May, UK regulator Ofgem announced its new price controls, known at RIIO-2, which set the allowed baseline return on equity at 4.3% in a cost of equity range of between 4.0% and 5.6%. This is close to 50% lower than the previous RIIO-1 price control.

The lower allowed return on equity, as well as a lower permitted return on debt, is intended to cut the costs passed on to UK energy consumers by GBP6 billion over the five-year price control period from 2021 to 2026 versus RIIO-1.

National Grid's financing assumption under RIIO-2 is for a cost of equity of 5.5% with a cost of debt at 1.7% and a 3.2% rate of return. The assumed equity capitalisation is 40%.

"Following stakeholder feedback we expect to refine these plans over the course of 2019 before submitting final business plans to Ofgem in December," National Grid said.

Shares in National Grid were up 0.3% at 841.30 pence on Tuesday morning.

By Anna Farley;

Copyright 2019 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
National Grid PLC 1,067.40 GBX 1.29

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