Northern Powergrid has lodged an appeal against Ofgem’s final determination on its business plan for the RIIO-ED2 price control, which begins on 1 April.
The electricity distribution network operator (DNO)’s appeal centres on the way costs have been allocated, with Northern Powergrid claiming that Ofgem’s assessment contains “material errors” that will ultimately have an adverse effect on its income.
It claims the regulator misallocated allowances between cost categories. In particular, Northern Powergrid has taken issue with the way costs have been allocated for the uptake of low-carbon technologies such as electric vehicle charging points, heat pumps and batteries.
The appeal application adds: “ relied on DNOs’ submitted cost proportions when allocating DNOs’ efficient modelled costs. decision to do so was irrational and illogical because DNOs’ submitted costs were based on decarbonisation planning scenarios that were manifestly different from the one that intended to fund.”
Northern Powergrid’s also claims that Ofgem “failed to compare costs on a rational and consistent basis when determining ”.
As a result of these alleged miscalculations, Northern Powergrid claims that the combined adverse impact of these errors is £171 million.
Utility Week understands the other DNOs have accepted their final determinations.
In November 2022, Ofgem approved £22.2 billion of investment by electricity distribution networks over the five-year ED2 price controls beginning in April.
The final determinations represent a £2.9 billion decrease when compared to the total expenditure (totex) allowances requested by distribution network operators (DNOs) in their business plans but a £1.3 billion increase when compared to the regulator’s draft determinations published in June last year.
Northern Powergrid’s appeal application has been submitted to the Competitions and Markets Authority (CMA), with Ofgem given until 16 March to submit any representations in relation to Northern Powergrid’s claims.
The CMA will make its decision of whether to grant permission for an appeal hearing by the end of March.
If approved, the appeal process takes around six months.
An Ofgem spokesperson said: “We can confirm we have received Northern Powergrid’s Notice of Appeal to the Competitions and Markets Authority (CMA) in regard to our final determinations for electricity distribution network funding for 2023 to 2028. We will consider the appeal grounds and respond to the CMA in due course.”