DATAMONITOR VIEW 2
Catalyst 2
Summary 2
ANALYSIS 3
The role of energy regulator Ofgem has grown to suit consumers and the government's changing requirements 3
For the last 20 years, RPI-X has been a success in terms of delivering a range of benefits to its stakeholders 4
RPI-X has attracted significant levels of private investment into the UK's energy network 4
Customers have for a long time benefitted from low and stable distribution charges as part of their energy bills 5
Stakeholders are also increasingly concerned about whether the existing model is fit for purpose 6
From RPI-X to RIIO: Ofgem is proposing an evolutionary new model to transform the gas and power networks 7
RIIO's key function is to attract investment and business plans with greater long-term perspectives 7
Components of the RIIO model 8
RIIO is strongly oriented toward offering carrots rather than waving sticks for achieving its various goals 8
Network companies have to go beyond capex and deliver a range of tangible and intangible outputs 8
RIIO promises a multitude of advantages for its stakeholders 9
However, change could also entail risks and potential drawbacks 10
To ensure its success in meeting its various goals, Ofgem's proposal relies on feedback from all stakeholders 11
RIIO is an innovative proposal that has emerged through patient engagement with its stakeholders 11
RIIO could become an example of future-oriented regulation to assist the transition to a decarbonized network 11
APPENDIX 13
Ofgem's history of price control reviews 13
Methodology 13
This Position Paper explains Ofgem's proposal, and sets out Datamonitor's views on the issues raised. 13
Ask the analyst 13
Datamonitor consulting 13
Disclaimer 14
List of Figures
Figure 1: Average distribution network charge (€c/kWh) payable by different customer groups in Great Britain, 2005-09 5
Figure 2: Components of the RIIO model 8
Figure 3: Over the years, a number of price control reviews have been implemented for both gas and electricity transmission and distribution networks 13
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