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The Competition and Market Authority’s (CMA) decision to back Ofgem's £17 billion networks price control will boost investor confidence, according to UK Power Networks chief executive Basil Scarsella.
Speaking last night at the Utility Week Lobby event at the Labour Party conference in Brighton, Scarsella said the six month CMA investigation had shown the price control process to be robust and fair.
He told delegates the findings are “important for the confidence of investors” because it shows the price control can be relied on, which he said is something “we should be proud of”.
Scarsella added: “Out of what is close enough to £20 billion of revenue, the CMA – which did a very thorough job in reviewing the price review – found an adjustment of around £100 million over eight years.
“That is an overwhelming endorsement of the regulatory regime.”
In March, British Gas appealed against Ofgem’s £17 billion eight-year price settlement for the companies, known as RIIO-ED1, having previously criticised the regulator for being too lenient in its price controls. Northern Powergrid (NPG) also appealed against the ruling at the same time arguing for greater leniency.
The CMA dismissed four of the five grounds of appeal brought forward by British Gas but has upheld one, reducing the amount of revenue the five DNOs are allowed to recover through charges by around £105 million over the eight-year price control period.
It also dismissed two of three grounds of appeal by NPG but upheld one relating to Ofgem’s adjustments to reflect potential savings through smart grids and technological innovations, increasing NPG’s allowable revenue by about £11 million.
British Gas has also been ordered to pay 80 per cent of the costs incurred by the CMA, and Ofgem to pay 20 per cent. In addition, British Gas has also been ordered to pay 60 per cent of Ofgem’s costs in connection with the appeal.
The investigation was carried out alongside a wider probe into the energy market which has been extended beyond its Christmas 2015 deadline. The findings of the wider energy investigation are now expected in April 2016.
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