Ofgem publishes the results of the 2018 Annual Iteration Process for energy network price controls
Ofgem recently published the results of the 2018 Annual Iteration Process (AIP) for energy network companies under its Revenue=Incentives+Innovation+Outputs (RIIO) price controls.
The AIP updates base revenues across Ofgem’s four price controls (electricity distribution, gas distribution, electricity transmission, and gas transmission) for the next regulatory year (2019/20).
The AIP process involves making annual adjustments to the revenue Ofgem allows networks to collect. For example, the 2018 process brings into effect previously announced decisions such as changes in revenue from the re-openers in the gas and electricity transmission price controls as well as the voluntary handing back of allowances in the gas and electricity distribution price controls.
In addition allowed revenues have been reduced across all four price controls following an update to the data set used to calculate the Cost of Debt (CoD). As a result of using the revised data set, the CoD value has fallen and this has been reflected both in the 2019/20 value as well as being retrospectively restated for the 2018/19 CoD value. This restatement is due to the temporary suspension of an underlying data series used to calculate the CoD value, in 2018/19.
In total, the AIP will reduce base network company revenues in 2019/20 by £827 million (in 2019/20 prices) compared to the assumptions made at the start of the price controls.
We have also published updated price control financial models (PCFMs) for the price controls here:
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