National Grid Navigates Regulatory Hurdles Amid £80 Billion Investment Plan

National Grid (LON:NG) is currently engaged with Ofgem, the UK's energy regulator, to finalize the RIIO-ET3 price control, which governs its Electricity Transmission business.

The company has formally responded to Ofgem's Draft Determinations, signaling both optimism and concern regarding the proposed framework.

National Grid acknowledges Ofgem's commitment to an £80 billion investment plan in the electricity transmission sector, recognizing the urgency of delivery, and the positive changes made to the financial package since the Sector Specific Methodology Decision. These steps are viewed as valuable progress.

However, National Grid believes the Draft Determination falls short of acknowledging the practical challenges associated with the unprecedented expansion of the electricity system. The company highlights the need to more than double investment in the transmission network.

National Grid explained that it has presented evidence and proposed solutions, advocating for changes to the Final Determination to establish a framework that it believes is both investable and workable.

This is said to include adjustments to the baseline return and incentives framework.

The company is also seeking a streamlined suite of funding mechanisms and a revised approach to Ofgem's decision-making processes in reopener scenarios.

The firm believes a workable framework should enable transmission owners to recover the efficient costs of their investment and facilitate project progression at the pace expected by stakeholders.

Investability and workability are deemed essential for transmission owners to fulfill their business plan commitments, including accelerating the decarbonization of the energy system and delivering cost savings to consumers.

As the process progresses towards the Final Determination in December, National Grid said it intends to maintain active engagement with Ofgem to secure a price control that attracts the necessary investment.

“A resilient, future-proofed network will be critical to economic competitiveness and growth for Britain in the years ahead,” said National Grid.