Gas distributor to appeal against Government regulator decision

Northern Gas Networks (NGN) says its Board has unanimously decided to appeal against regulator Ofgem’s final determination on its RII02 Business plan, published in December last year.

The appeal to the Competition and Markets Authority (CMA) was launched on 3 March, with an outcome expected in autumn 2021.

It closely follows Tuesday’s news that National Grid is also taking Ofgem’s plan to cut energy network company earnings to the competition watchdog.

As reported in the national press, National Grid said it would refer parts of Ofgem’s new regulatory plan to the CMA because it does not allow large enough returns for its investment in the UK’s gas pipes and electrical cables.

NGN’s grounds of appeal centres on four key issues: Ofgem’s approach to calculating the cost of equity, the inclusion of an outperformance wedge, ongoing efficiency and the level of incentive offered to the frontier company.

Its CEO, Mark Horsley, said: “NGN is the frontier performing company in the gas distribution network industry and at the heart of NGN’s strategy is our desire to deliver efficiency gains for the benefit of our customers in a sustainable way.

“The final determination gives us clarity on what we need to deliver for our customers, and we’re in great shape as a business to continue doing this from April.

“Ofgem’s proposals do however present a very challenging environment for the RIIO-GD2 price control, and we consider that there are errors on specific aspects of the Determination that we are asking the CMA to adjudicate and conclude on.

“We will be following the formal regulatory process in order to seek a resolution and correct these errors.”

NGN is the gas distribution network for the North East, northern Cumbria and much of Yorkshire, transporting gas to 2.7 million homes and businesses across the region.