Ofgem continues business critical activities; may delay some RIIO-2 elements

Ofgem has provided an update highlighting the statutory and time-critical elements that will continue despite the Coronavirus crisis. However, some RIIO-2 activity faces possible delays.

In its information on the COVID-19 response for energy licensees, the regulator set out its short-term priorities and the obligations it also requires suppliers to meet. The information followed an open letter sent by Ofgem to network operators outlining an “enabling framework for regulatory flexibility”.  

Unsurprisingly, Ofgem’s immediate focus is “ensuring that the energy industry can effectively respond to the coronavirus (COVID-19) crisis. Our priority is to protect consumers, especially vulnerable people, and to maintain Britain’s supply of electricity and gas.”

To that end, the organisation listed a set of priorities through to 30th June 2020 which include:

  • Adjusting the levels of Default Tariff and Prepayment Meter energy price caps (PMEPC)
  • Progressing development of PMEPC replacement
  • Consult and publish decisions on levy cost claims from suppliers of last resort
  • Maintain critical retail market monitoring
  • Consult on the Capacity Market Rules Policy, but offering an extended industry response period
  • Implementing existing RIIO-1 controls
  • Implementing ESO incentives.

Regarding RIIO-2, the website information states: “For RIIO-2, our plan remains to publish final determinations by the end of 2020, and for the new controls to begin from 1 April 2021.  

We propose to continue working towards publishing a consultation on our draft determinations for the transmission and gas distribution sectors and Electricity System Operator (ESO) controls in early July 2020, followed by a consultation on the electricity distribution sector methodology (RIIO-ED2) in late July 2020.”

However, in an online Q&A session held by industry publication Utility Week, Ofgem Chief Executive Jonathan Brearley suggested some flexibility may be required in the RIIO-2 timetable. Although remaining non-committal, he commented: “It’s very important to Ofgem, it’s very important to the sector and I believe it’s very important nationally that we do get RIIO-2 determinations on time.”

Brearley continued: “That doesn’t mean that if we get to a point where the network companies say to us they’re at such as stage in their business continuity plans that they think it’s going to be extremely difficult to engage properly in this process – and any other stakeholder may come to us and say the same thing – then we may have to adapt. But right now, our Plan A is to continue with the program under the timetable that exists.”

Fundamentals Business Development Director, Dr. Vincent Thornley, encouraged both Ofgem and the industry itself to not allow COVID-19 to result in missed targets.  “One of the concerns of the supply chain is to ensure we get back on track as quickly as possible and deliver the whole ED1 programme within the agreed timescale. There should be no need for the pandemic to result in failure to achieve this.

“These concerns have been highlighted to Ofgem by our trade body, BEAMA, and the whole supply chain stands ready to support ED1 delivery. We are looking for engagement with Ofgem and the network companies to plan a ‘rebound’ strategy.”

Some elements of the RIIO-2 consultation have already been earmarked for a timescale review, according to the Ofgem website. In particular, the first informal consultations on RIIO-2 licence modifications and on the net zero re-opener. The new timings are slated for confirmation in June 2020 or later