RIIO-2 Energy Network Price Controls—the evolving position
Produced in partnership with Isabel Taylor of Slaughter and May and Jessica Staples of Slaughter and May

The following Energy practice note produced in partnership with Isabel Taylor of Slaughter and May and Jessica Staples of Slaughter and May provides comprehensive and up to date legal information covering:

  • RIIO-2 Energy Network Price Controls—the evolving position
  • Introduction and background
  • Background to the RIIO-2 price controls
  • Background to the inclusion of the ESO
  • Overview of the Final Determinations
  • Outputs and incentives
  • Increasing network efficiency
  • Dealing with uncertain costs
  • Competition and innovation in networks
  • Early competition
  • More...

RIIO-2 Energy Network Price Controls—the evolving position

Introduction and background

This Practice Note provides an overview of the ‘RIIO-2’ Great Britain energy network company price controls which came into effect on 1 April 2021 for gas distribution, gas and electricity transmission and the Electricity System Operator (ESO). This Practice Note will continue to be updated as the position evolves.

RIIO (Revenues = Incentives + Innovation + Outputs) refers to the methodology through which the Office of Gas and Electricity Markets (Ofgem) determines the prices that Great Britain’s licensed onshore energy network owners and operators can charge for the use of the electricity and gas transmission networks.

These charges are, in the first instance, paid to network companies by licensed suppliers and generators/gas shippers (under the Connection and Use of System Code, the Distribution Connection and Use of System Agreement and the Uniform Network Code). However, they are ultimately passed on to customers through energy supply bills, of which the charges make up a significant portion. For an introduction to the legal basis of energy network company price control in Great Britain, see Practice Note: The regulation of charging (‘price control’) by Great Britain’s electricity and gas network companies.

Background to the RIIO-2 price controls

Ofgem first developed the RIIO approach in 2010. The first implementation of RIIO is referred to as RIIO-1. Subject to relatively narrow rights of amendment ‘mid-period’,

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