Ofgem’s senior partner, improving regulation, Martin Crouch said at a conference earlier this week that the current length of the control allows network operators to focus on customers rather than satisfying the regulator.
He added that the price control has the flexibility, through mechanisms such as the mid-point review, to allow the regulator to assess whether the outputs network companies are focused on are the right ones during the eight year period.
He said: “The framework has lots of volume drivers, lots of mechanisms that manage the uncertainty, so we try to strike the right balance.”
But he added that one of the key lessons to be learnt from the first eight year cycle is “how much the industry is changing.
“If it changes beyond recognition then that’s something that we need to think about for the future.
“I think it will be clearer as time goes on how that is panning out.”
Ofgem’s chief executive Dermot Nolan added that “serious judgements about the future of the energy system” would need to be made in future price controls, but that it would be a “challenging job”.
Ofgem has singled out electricity transmission for a possible mid-period review (MPR) after identifying some issues, such as the network output measures, the customer and stakeholder incentive mechanism and the strategic wider works submissions.
Gas distribution is unlikely to be reviewed as Ofgem said in November last year that it had not identified any “material issues” that would require a review.