Citizens Advice response to the Ofgem consultation on the RIIO-ED1 Green Recovery Scheme – Potential Extension for accelerated removal of polychlorinated biphenyls (PCBs)
This submission responds to the Ofgem consultation on the regulatory treatment of the proposed acceleration of removal of polychlorinated biphenyls (PCBs) in the electricity distribution network.
We recognise that there are revised statutory obligations for the UK’s Distribution Network Operators (DNOs) to reduce the use of certain PCB-using equipment by 2025. We also note that there were no RIIO-ED1 (ED1) allowances for this activity, and that the DNOs have requested funding during ED1 to accelerate the decommissioning of this equipment rather than waiting for RIIO-ED2 (ED2) funding (2023-28).
We have the following comments:
There should be consumer benefit in removing PCBs from the environment faster, as well as smoothing the supply chain for the DNOs over a longer period. However, we have concerns regarding the use of the Green Recovery Scheme to deliver this accelerated PCB removal which we outline below.
We note that only 4 of the 6 networks have asked for an acceleration of spending. If there are merits in accelerated spending in the ED1 price control period, then all companies should be seeking to undertake this activity. It is possible that companies that have underspends (that would therefore benefit from the sharing factor) may be choosing to defer the PCB removal to ED2 so that their underspends are not diminished. Ofgem should identify why all companies have not sought accelerated spending. If it is shown that accelerated PCB removal is in consumers’ interests (including assessing the impact of the different regulatory treatment of revenues between ED1 and ED2), Ofgem should ensure that all DNOs accelerate PCB removal into ED1.
We are concerned that, under the Green Recovery Scheme, the ED1 rate of return will apply to any accelerated spending, rather than the ED2 value which is expected to be lower. If consumers are not getting upside in this potential extension of the Green Recovery Scheme through some DNOs funding out of underspent allowances, then it would be appropriate to use the ED2 rate of return.
We have a number of other recommendations and points with respect to the use of the Green Recovery Scheme and its interaction with the ED1 or ED2 price controls which are outlined in the consultation response.