Earlier, SSE had said that it would assess Ofgem’s final proposals against the combined impact of three key criteria: the scope to earn additional revenue through operational efficiency and excellence; the treatment of ongoing pension costs; and the allowed return for shareholders as measured by the weighted average cost of capital.
According to SSE, on its own, the headline allowed weighted average cost of capital contained within the proposals will not be enough to provide an adequate return on investment in electricity distribution or transmission. The overall package proposed by Ofgem should allow SSE to secure a sufficient return from its electricity distribution assets in the north of Scotland and central southern England.
Gregor Alexander, finance director of SSE, said: “You have to look at proposals of this kind as a package, and on that basis they represent an acceptable outcome. It is not, however, a package which is in keeping with the scale of the long-term investment challenges set out in Ofgem’s own Project Discovery analysis.
“Our priorities now are to retain our position as the most efficient electricity distributor in the country, delivering supplies of electricity customers can rely on, and to work with Ofgem to make sure that the right frameworks are in place to encourage the essential future investment in energy distribution and transmission networks.”
