Government expects network companies to work with Ofgem, the independent regulator, to ensure a settlement for the upcoming set of energy network price controls which is fair to investors and consumers, including in relation to Government’s net zero and clean growth ambitions. Network regulation is a matter for Ofgem. By law, Government has no role in this process.
Ofgem has recently taken steps in this regard. In August 2019 Ofgem published an open letter, asking network companies across all sectors to clearly propose and evidence how their business plans for the next price controls are able to adapt to support delivery of the net zero target. Final business plans for electricity transmission will be submitted to Ofgem in December, with determinations to be made by the regulator in 2020 ahead of those new price controls starting in April 2021.
Ofgem has also published an open letter consultation on the proposed framework for the next electricity distribution price control starting two years later in April 2023. In this letter Ofgem states it is considering including a more direct link between network company revenues and the achievement of outcomes outside the delivery of traditional network services, for example the decarbonisation of transport and/or heat. Ofgem expects to confirm its decision on the framework that will apply in December, with further detailed consultation of key regulatory policy areas and approaches, including decarbonisation, scheduled for 2020.