On the 5th November 2018, Ofgem hosted a workshop in London with interested parties to review their proposed approach and structure to RIIO-2 business plans, and the associated timescales they are working towards.
What we do know so far is that Ofgem have outwardly signalled that ‘they'll be tougher on network companies to deliver innovation, reliability and investment at the least cost to consumers.’ The workshop was attended by both gas and electricity distribution and transmission networks alongside interested parties. Explain attended the workshop, sharing our insight and cross sector regulatory business planning experience.
It was evident that the timescales are closing in for gas and electricity transmission and gas distribution with sector methodologies set to be published at the end of 2018 and initial submission of business plans to Ofgem by July 2019 in advance of RIIO-T1 and GD1 ending in 2021. For electricity distribution their business planning period ends in 2023 and they are now in preparation for RIIO-ED2.
In this blog we will provide insight into some of the emerging themes that Ofgem have signaled as significant as part of the RIIO-2 price controls, and share what we have learnt from our own experience of delivering insight to support business planning throughout RIIO-1 and most recently PR19 in the water sector.
Approach to RIIO-2 business plans
Ofgem have signaled that they will publish more detail on the proposed methodology and approach to business plans in Q4 of 2018 as part of the sector methodologies. Initial indications yesterday, highlighted that they want to see less variance in terms of layout and structure of the individual plans, and have established a high-level content outline which includes the following:
The area of concern raised from both gas and electricity transmission and gas distribution was around the timescales that Ofgem have put in place to deliver first drafts of business plans.
Ofgem announced at the workshop that they will consult on sector specific methodologies in December 2018 and will issue a sector specific methodology decision in early Q2 of 2019, these are in line with the timescales that were presented in the Framework Decision earlier this summer.
To deliver in line with timescales Ofgem must receive companies’ business plans by the end of 2019. The dates provided at the workshop included:
Shared learning – PR19
To deliver a best in class business plan which meets the objectives of Ofgem, network companies need to ensure that they take learning and best practice from not only RIIO-1 but also have cross sector stimulus. An example of this is the most recent phase of business planning in the water sector, PR19.
Ofgem will be looking for detail and clarity on a range of topics outlined earlier in this blog, several areas draw influence and similarity to the water sector, these areas include:
The team at Explain have been conducting independent research and engagement within the water sector for over 20 years working throughout PR09, PR14 and PR19. They are experts at putting in place research programmes to deliver against the changing needs of the sector. Throughout PR19 Explain delivered research and engagement into a range of topics which translate directly into areas that need to be considered as part of any RIIO-2 business plans, these include:
Unpicking the regulatory framework, why Explain?
Explain has worked within the utilities sector for two decades, working in contracted partnerships with several of the UK’s biggest and most respected suppliers and distributors. These relationships have allowed Explain to develop an in-depth understanding of the importance of consumer and stakeholder engagement, ensuring we engage with the end user to deliver insights that support and are aligned to business planning.
We will continue to share our experience and best practice, and in our next blog we will explore – ‘what is best in class engagement.’
For further information on how we can support you, please contact Holly Shiel-Redfern at email@example.com