August blog
The ISG has been ramping up its focus on NGN’s RIIO-3 business plan development.
In mid July Ofgem published its decision document on the specific methodology it will apply to RIIO-3 plans for gas distribution and transmission companies.
There were no significant or unexpected changes to the regulator’s position following a consultation exercise.
Ofgem has specified that it expects companies to produce plans by with 4 main outcomes. NGN will need to ensure its network is
* fit for net zero transition and provides
* secure and resilient supply of gas
* high quality service to customers
* value for money and efficiency
The business plans need to be submitted by 11 December.
We have scheduled deep dive sessions to review the strategy documents the companies are required to submit along with their business plans and many of these sessions will take place in August to allow us to influence the strategies before they are finalised.
Our most recent full meeting was held at NGN’s Doxford Park offices near Sunderland on 5 August.
We received a helpful update on business operations from the Chief Operating Officer. We were reassured regarding safety performance and delivery of the current price control targets. Whilst recognising the challenges in delivering some more complex engineering projects, we also noted the positive position NGN has in retaining its industrial staff and attracting new applicants to the business. Overall the company has reported strong performance in its report to Ofgem at the end of its third year of RIIO-2, which we wish to see it build on for RIIO-3.
We covered two main topics at the meeting. Firstly we considered how NGN has been reviewing and updating its corporate vision, and its company purpose and values to ensure its brand reflects the culture and ambition of NGN.
Most people have little understanding of how gas distribution companies operate. Given their role as an anchor organisation in the region, it is important that when NGN engage with stakeholders they are able to communicate not only what they do, but how they deliver and their wider company values.
We also reviewed proposed costs associated with the new business plan and how NGN is providing value for money to customers.
We shall review a selection of the Engineering Justification Papers and that are submitted for key areas of work, and will scrutinise in greater depth how NGN has undertaken optioneering and cost benefit analysis.
Customers will be facing higher network charges due to a number of factors. It is important that whilst all necessary works are undertaken to keep the flow of gas safe and reliable and the network transitions to the low carbon future, we see real value for money to customers in future investments and revenue allowances.
Finally we are updating our Terms of Reference in line with Ofgem’s latest Business Plan Guidance and you will find these here on our website by the end of this month (August) Whist there is much to be done to produce the final business plan, NGN has a clear and detailed planning schedule and is engaging well with our group as we offer ongoing scrutiny and challenge.