ED2 draft determinations ‘tougher than expected’

Ofgem’s draft determinations for the RIIO ED2 price controls were “slightly tougher than expected” due to higher levels of assumed productivity gains and reduced scope for operational outperformance, according to ratings agency Moody’s. In the case of the latter, Moody’s said the potential financial rewards from output delivery incentives, which would be significantly reduced when compared to the current price controls, would be harder to achieve due to tighter targets, and would also be outweighed by potential penalties by a ratio of more than 2:1.