Citizens Advice application to intervene in the CMA Energy Licence Modification Appeal 2023 (ED2)
Our key points relating to our application to intervene in this Competition and Markets Authority (CMA) appeal for the RIIO-ED2 Energy Licence Modification:
Citizens Advice wishes to intervene, to oppose this appeal, as part of its statutory role to represent domestic and small business energy consumers in Great Britain.
Allowing this appeal would grant Northern Powergrid (NPg) significant additional revenue, to be funded by consumers, without any related improvement in service or investment. We do not believe that this is justified. We note that in its submission, NPg has not offered any argument or evidence for why this appeal is in the best interest of their customers, or consumers more generally. We, similarly, have been unable to find any such arguments.
Any unjustified returns for network companies arising from RIIO-2 add unfair cost to consumers’ bills (at the time of an energy and cost of living crisis). We also believe unjustified returns will erode the credibility of the regulatory regime and so damage customer trust. Trust will be vital to net zero delivery. This must mean that there is a high burden of proof to allow network companies additional money.
NPg claims to be underfunded but has not provided any evidence that this will occur in reality, preferring instead to compare allowances with a notional figure that it has previously raised concerns over.
NPg has not demonstrated that it will receive allowances at a level below what it expects to spend. It has simply demonstrated that if you calculate allocations using a different method you get a different answer (that is favourable to NPg).
Indeed, when comparing with NPg’s business plan - which should theoretically represent NPg’s view of actual required expenditure - there is evidence that NPg would be over-funded if their preferred allocation method was followed.
So, there does not appear to be any credible risk that NPg will be underfunded or, as a consequence, be unable to make acceptable returns on investment. This means that allowing this appeal would lead to substantial windfall gains for NPg.
This should be seen in the context that UK regulated networks companies have generally and consistently enjoyed high returns through regulatory settlements that have proved too generous. This is why the returns enjoyed by network companies have come under considerable scrutiny for a number of years. Allowing windfall gains, on top of an already generous settlement, is likely to bring the overall regulatory regime under further pressure. A stable regulatory regime is important for consumers, particularly with the increase in investment required for net zero.