CMA publishes final determinations on electricity distribution appeals

In March, the Competition and Markets Authority (CMA) announced that it had granted permission to (i) Northern Powergrid (Northeast) Limited and Northern Powergrid (Yorkshire) plc (together ‘NPg’) to appeal against Ofgem’s decision to modify its 2 licences; and (ii) British Gas Trading Limited (BGT) to appeal against Ofgem’s decision to modify the licences of 10 distribution network operators (DNOs).

In its determination on NPg’s appeal, the CMA dismissed 2 of the 3 grounds of appeal. It upheld one ground in relation to Ofgem’s adjustments to reflect potential savings available from the introduction of smart grids and other technological innovations. The CMA’s determination will increase NPg’s allowable revenue over the price control period by around £11 million.

In its determination on the BGT appeal, the CMA dismissed 4 of the 5 grounds of appeal. The CMA upheld, in part, one ground which sought to challenge the adjustment that Ofgem made to the up-front rewards and penalties for DNOs in its Information Quality Incentive scheme. The CMA’s determination increases the net penalty across the 10 ‘slow-track’ DNOs (those which did not reach an early settlement with Ofgem). After taking into account tax, the effect of the increase in the penalty is to reduce the amount of revenue DNOs are allowed to recover through charges by around £105 million over the price control period.

The appeals were made under section 11C of the Electricity Act 1989 and relate to price controls made for the 8-year period from 1 April 2015 to 31 March 2023. NPg is an electricity DNO. BGT is an electricity supplier which pays charges to each of the DNOs for use of their respective electricity distribution networks. Ofgem announced the details of the price controls inNovember 2014 and published its final decision on 3 February 2015.

The final determinations and all other information relating to the appeals are available on the Northern Powergrid and British Gas Trading case pages.

The appeals are separate from the CMA’s ongoing investigation into the retail energy market.

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