Ofgem puts RAB funding model among ‘key tasks’

Developing a framework that would allow new nuclear to be delivered under a regulated asset base (RAB) financing model is a key task for Ofgem in the period to 2023, the regulator has said. Government is expected to publish a consultation shortly on the funding model and Ofgem has already asked government to include the necessary work in its budget allocation.
Developing the funding model (which could be applied to other low carbon technologies, Ofgem says) is one of six key tasks the regulator has set itself for the next four years. It also wants to:
  • Develop a successor regime to the current default tariff price cap, which must expire no later than 2023;
  • Conclude the RIIO2 price control in a way that reduces costs for consumers and supports the transition to net zero greenhouse gas emissions;
  • Manage a large-scale extension of flexibility markets enabled by appropriate technologies;
  • Gain a closer understanding of how regulation affects different groups of consumers;
  • Develop how it considers the sustainable development benefits of regulatory changes.

The programme came in a new ‘strategic narrative’ for the upcoming period. It identifies three core priorities for the regulator; and although the regulator operates within a framework set by government it promised that “where we think there are important policy gaps that affect consumers, we can call this out.”

The first priority was to use markets to drive down costs and improve innovation in the industry, removing barriers to new entrants and new business models.
Its second was to protect consumers with a touch price control for network companies, targetted interventions and more protection for vulnerable customers.
Finally the regulator said ‘delivering a net zero economy at the lowest cost to consumers’ was its third priority. That included taking a whole systems approach, managing the low-carbon schemes in its e-Serve arm effectively and managing its own sustainability. But that fell far short of responding to calls for the regulator to place the move to a low-carbon economy much higher in its fundamental duty to protect current and future customers, for example by giving networks environmental targets duringf their upcoming price control.
Ofgem acknowledged that the energy industry would be undergoing a revolution in the next decade, with boundaries dissolving between producers and consumers and new parties entering the market. It promised to respond with new ‘agile’ ways of working.
Read the strategic narrative here
Further reading

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