Ofgem holds the line on final determinations

Ofgem has held the line in its final determinations for power networks today, with only minor adjustments relating to pension liabilities.

The eight year settlements for five of the six DNOs remain broadly in line with the summer’s draft determinations. Two companies, Electricity North West and SSE Power Distribution, have seen their settlements rise by 1.7 per cent, while SP Energy Networks has seen its sum fall by 0.6 per cent.

The networks had been hoping that the regulator would be more generous in its final determinations, following draft determinations that saw £1.4 billion wiped off companies’ business plans.

Ofgem chief executive Dermot Nolan said: “Today’s plans represent good value for consumers. There will be significant investment in Britain’s electricity network, and reduced pressure on bills. Ofgem expects network companies to step up and take a more visible and active role in helping customers, particularly the most vulnerable.”

The regulator said its overall assessment is relatively unchanged since draft determinations. However, since then there has been an audit of pension liabilities, outside Ofgem’s control, which must be factored in to the network companies’ business plans.

Government rules state that network companies have to fund defined benefit pension schemes that were established before privatisation. These schemes are closed to new members but have liabilities for the future pensions of the schemes’ members. The government rules state these liabilities must be provided for through the price controls. This has reuslted in the estimated bill reduction over the price control period being lowered from the £12 announced in July to £11, or £10 including WPD, the regulator said.

The final determinations are now under consultation for eight weeks, during which time the networks must decide whether to accept them, or take the regulator to the Competition and Markets Authority.

In a statement SSE Power Distribution, which publicly criticised the summer’s draft determinations, said: “Ofgem’s final determinations propose a real reduction in the distribution share of the average household bill in SSE’s North of Scotland network area of around £27 next year and in its South of England network area of around £18. SSEPD is committed to delivering the improvements in customer service that it set out in its business plan.

“Over the coming weeks SSEPD will carefully examine the detail of Ofgem’s final determination and assess whether it represents a fair balance for customers and investors. SSEPD has until early next year to complete its assessment of Ofgem’s final determination.”