Energy suppliers and network operators were divided on a ruling this week by Ofgem on measures to curb volatility in network charges.
Electricity and gas network operators will face no limit on shifts in their charges to cover unpredicted potential costs under the new RIIO regulatory regime for gas and electricity transporters. The networks backed the energy regulator’s view that a cap and collar would impose too much risk to their cashflow. Energy UK, representing the major suppliers, also supported Ofgem’s position, but small suppliers and British Gas owner Centrica came out against. Small suppliers said uncertainty in network charges created a barrier to entry.
Ofgem said “predictability of charge changes” was key for stakeholders over stability of charges. It opted for more information for suppliers, less frequent changes and lagging regulatory incentive gains as measures to rein in charge volatility.
This article first appeared in Utility Week’s print edition of 26th October 2012.
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