Ofgem’s Emerging Thinking consultation document suggests that the RPI-X price control mechanism, which has been used by regulators for over twenty years, needs to be changed as it will not be able to cope with the pace, uncertainty and scale of change needed to deliver sustainability for consumers.
The regulator’s consultation sets out a potential new regulatory framework for consultation. This framework seeks to ensure network companies deliver investment when and where it is needed and stimulates innovation in the way networks are run.
If implemented, it would also encourage a change in the mindset of network companies so they manage the uncertainty and risk in delivering a low carbon economy and seek to innovate as well as to invest to support this transition, Ofgem said.
The UK energy regulator is consulting on proposals to change the emphasis of regulation from focusing on companies’ costs to look at what more companies can deliver in terms of reliable networks, safety, and investment to support low carbon generation and meet the needs of consumers.
Ofgem’s proposals for network regulation will be subjected to consultation before concrete and detailed proposals are published in the summer. These will then be incorporated in its network price controls, starting with the transmission and gas distribution price controls in 2013.
