Recommendation 46

The RIIO-ED1 process, which set the amount network operators could charge energy bill-payers for making upgrades to the grid over the period 2015–2023, proved overly generous. Distribution Network Operators were able to either build 108 Decarbonisation of the power sector more infrastructure that is rewarded through the Regulated Asset Value, or not spend on that infrastructure and keep a proportion of underspends. Given that technology deployment curves are hard to forecast, we understand Ofgem’s use of uncertainty mechanisms for RIIO-ED2. We will be looking to the regulator to ensure that they better manage risk and that network companies bring forward the required investment. The uncertainty mechanisms will need to be used efficiently, before customers see problems, particularly if the economics of heat pumps or electric vehicles change quickly.