Citizens Advice response to the Ofgem Call for Evidence on Electricity Distribution Business Plans for RIIO-2
The electricity distribution network operator (DNO) companies have submitted their final ED2 business plans to Ofgem. We have provided our views to Ofgem which include our key recommendations:
Ofgem must ensure that consumers get the services that they need at the lowest possible cost, including ensuring that the best value is extracted from existing assets, personnel, and systems before investing in new operations and equipment.
Ofgem should consider known areas of potential generosity in cost of capital.
Ofgem should scrutinise any advice or support-giving proposals which involve an increase in scope or extent, especially if they might duplicate other bodies’ activities or where there may be competitors. Ofgem should also prioritise the development of an open market for flexibility services over DNO activity given the large scale benefits that can be unlocked. Ofgem will need to ensure that DNOs have justified why they are the best-placed bodies and ensure that competition is not impeded.
We reiterate our call for the government, BEIS, Ofgem, and DNOs to look holistically at the provision of energy advice and related support across Great Britain and evaluate the best solutions for organising and funding that provision to gain best outcomes for consumers and for an effective, cost-efficient delivery.
DNOs should coordinate a scalable platform for national Priority Services Register (PSR) data sharing to improve the energy service experience of consumers in vulnerable circumstances for trusted third parties or other utilities.
We recommend that Ofgem is more prescriptive in future business plan guidance for price controls including requiring data to be produced in more comparable and simpler forms by topic area to facilitate ready comparison and scrutiny. For the draft determinations, it may be valuable to offer more prescriptive guidance on how DNOs should report the outcomes of their various plan initiatives so that they are readily comparable and it will be easier to hold the companies to account.
Ofgem will need to review the UMs on offer and conduct detailed modelling to identify the best options to meet net zero rapidly and cost-effectively. A lower sharing factor for companies is recommended where there may be a risk of companies being over-compensated, especially where the TIM may interact with the UM. We recommend the support of high confidence and lower range forecasts to ensure that lower baseline funding is provided and that there is a maximal use of UMs. We support a common approach for all networks.
Ofgem will need to be appropriately resourced to be agile and responsive to support the delivery of the various UMs during ED2.
There may be merit in separating DNO and DSO functions, however, the full costs and benefits of such separation need to be evaluated, and the views of all stakeholders need to be captured. We understand that Ofgem is holding a consultation on DSO Governance later in 2022 which we welcome. We believe that progression to a separate DSO is likely to be in the best interests of consumers, subject to the benefits justifying the costs.
Ofgem will need to scrutinise the business plans carefully to ensure that cost-efficient and best practice solutions have been selected by DNOs in every part of their operations, including wider use of energy efficiency and flexibility service provision.
We also commissioned research from Baringa Partners on the DNOs’ Environmental Action Plans. Please read this report below.