SSEN Transmission appeals Ofgem’s RIIO-T2 licence modification decision to the CMA

SSEN Transmission, the owner of the electricity transmission network in the north of Scotland, can confirm that it intends to appeal certain elements of Ofgem’s RIIO-T2 price control settlement to the Competition and Markets Authority (CMA).  This follows the publication in December of Ofgem’s Final Determinations for the RIIO-T2 period, which will operate from 1 April 2021 to 31 March 2026, and Ofgem’s subsequent consultation on associated licence condition changes.

The appeal is both technical and narrow in scope, focussed on areas where Ofgem’s decision does not reflect the robust evidence provided throughout the price control process, alongside material errors in the decision.  These are:

  • Cost of Equity which SSEN Transmission remains disappointed does not reflect market conditions and the robust evidence provided throughout the price control process. 
  • Outperformance wedge which goes against established regulatory practice by assuming, rather than incentivising, outperformance.
  • New exposure to transmission charges which unfairly expose Transmission Owners to any under recovery of the NGESO’s own revenue from the market (i.e. to Transmission Network Use of System charges that the NGESO is responsible to recover from users of the transmission system).
  • Loss of appeals right for additional TOTEX released through Uncertainty Mechanisms and TOTEX adjustments made following an outputs assessment, which goes against established regulatory practice, creating unacceptable risk and precedent for future price controls.

SSEN Transmission has chosen not to appeal on the remaining elements of Ofgem’s RIIO-T2 settlement (e.g. TOTEX or specific projects) and looks forward to working constructively with Ofgem to deliver its stakeholder-led business plan ‘A Network for Net Zero’.

Subject to the CMA granting permission to appeal, the process is expected to take until the Autumn to reach a conclusion.

Commenting on the appeal, Rob McDonald, Managing Director of SSEN Transmission, said:

“Our appeal raises technical but very important issues that we are asking the CMA to correct. In the meantime, we can start to deliver against our stakeholder-led business plan and build our network for net zero, supporting government climate change targets and the green recovery from the coronavirus pandemic.

“We would like to thank Ofgem for its constructive engagement following publication of its Draft Determinations, and while it is regrettable we have been unable to reach agreement on all aspects of the final price control settlement, we will continue to work constructively with Ofgem and all stakeholders as the CMA considers the merits of our appeal.”