Critical Friends Panel 12 - EPN RIIO-ED1 Final ... · Critical Friends Panel 12 - EPN RIIO-ED1...

Critical Friends Panel 12 - EPN

RIIO-ED1 Final Determination

& Stakeholder Priorities

12 March 2015

Safety and housekeeping

• No planned fire alarms

• Emergency exits

• Fire assembly points

• Toilets

• Mobile phones

• Data Protection - we record our findings and publish a

report of the proceedings and our follow-up actions

2

Objectives

• Clear understanding of the implications of

Ofgem’s RIIO ED1 determination

• Gather your feedback on our proposed future

performance reporting & what we communicate

• Understand the issues material to you related to

our business activities

3

Today’s Agenda

• What issues are material to your organisations?

11:10 – 12:10 STAKEHOLDERS’ PRIORITIES 2015/16

09:30 – 09:40 INTRODUCTIONS

10:50 – 11:10 COFFEE

12:30 – 14:00 LUNCH

9:40 – 10:10 RIIO ED1 FINAL DETERMINATION

• Cost implication to our customers

12:10 – 12:30 QUESTIONS

10:10 – 10:50 REPORTING OUR PERFORMANCE IN RIIO ED1

• What performance reporting do you expect?

• What should be included in the reports?

4

The RIIO ED1 Final Determination

Robert Friel

Regulatory Strategy Manager

5

Overview

• Outcome is an improvement over Draft Determination but

remains challenging

• ED1 Process has delivered benefits for consumers with the onus on

companies to prove their requirements

• Fast track decision has realised more benefits than expected by all

parties

• Tough settlement for the industry due to the additional stretch

required to meet the innovation challenge in smart grid

implementation – not all companies have yet accepted

• Alignment of business performance to Totex and Outputs is critical

– New business system architecture - initiated in 2013 at shareholder cost

– Performance monitoring focus on achievement of Outputs

• Annual update of progress on delivery of ED1 to stakeholders

6

A reminder – the Ofgem ED1 timetable

Working Group Meetings

Strategy decision

published

DNOs Submit

Business Plans

Statutory consultation

on new license conditions

Fast-Track Consultation

Period

Non fast track final

determination published

2012/1

3

2013/1

4

2014/1

5

RIIO-ED1 Strategy Development Normal Assessment Process

Fast-Track Assessment Process Statutory Consultation & RIIO-ED1 Implementation Key: Ofgem Key Milestones

New price control

commences

Strategy consultation

paper

Strategy Consultation

Period

Non fast track DNOs

resubmit Business

Plans

Initial assessment

and fast track draft


Non fast track draft


Fast track final


Non fast track consultation

period

7

RIIO-ED1 determination process

2014 28 November Final determination published by Ofgem

17 December Ofgem publish draft ED1 licence consultation

2015 14 January Draft ED1 licence consultation closes

~ 21 January Ofgem publish final ED1 licence consultation

By ~ 18 February Licencees accept or reject ED1 licence

~ February (tbc) Finalisation of ED1 reporting template

1 April ED1 commences

31 July 14/15 RRP submission to close DPCR5

8

Ofgem efficient frontier assessment

Overall, UKPN has received a 10.8% cut, compared to 10.9% at draft determination.

However other DNO cuts have improved by more.

• Only SP total efficiency

cut has increased since

Draft Determination

• ENW and SSE have

improved relative cost

efficiency since DD

• ENW +0.6% to +0.7%

• NPG -1.9% to -2.4%

• UKPN -4.5% to -4.7%

• SP -2.3% to -2.7%

• SSE -1.6% to -1.5%

• Ofgem included

additional cuts for real

price effects and smart

grid savings

9

ED1 cost benchmarking – ED1 outcomes

10

• Difference between DNO revised business plan and Ofgem’s

assessed efficient costs

EPN cost and volume challenge

Final determination November 2014

Draft determination - July 2014

*Ofgem additional RPE and smart benefits have been applied across all cost areas

11

Totex

Submitted

£m

Totex

reduction

£m

Volume

reduction

£m

Cost

reduction

£m

TOTEX

reduction

EPN Load CAPEX 496.2 -13.4 -25.4 12.0 -3%

Non load CAPEX 579.1 -109.0 -50.5 -58.5 -19%

other CAPEX 145.9 -12.3 7.9 -20.2 -8%

NOCs 606.8 -37.4 -16.8 -20.6 -6%

CAI & Smart-metering 605.8 -44.4 -7.6 -36.8 -7%

BS & non Op CAPEX 330.9 -12.3 -4.7 -7.6 -4%

TOTAL 2764.8 -228.9 -97.2 -131.8 -8%

Totex

Submitted

£m

Totex

reduction

£m

Volume

reduction

£m

Cost

reduction

£m

TOTEX

reduction

EPN Load CAPEX 496.2 -10.1 -18.1 8.0 -2%

Non load CAPEX 579.1 -99.8 -49.4 -50.4 -17%

other CAPEX 145.9 -13.3 -3.6 -9.6 -9%

NOCs 606.8 -56.8 -21.8 -35.0 -9%

CAI & Smart-metering 605.8 -39.6 3.1 -42.8 -7%

BS & non Op CAPEX 330.9 -9.6 0.0 -9.6 -3%

TOTAL 2764.8 -229.3 -89.9 -139.4 -8%

UKPN cost and volume challenge

Final determination November 2014

Draft determination - July 2014

*Ofgem additional RPE and smart benefits have been applied across all cost areas

12

Totex

Submitted

£m

Totex

reduction

£m

Volume

reduction

£m

Cost

reduction

£m

TOTEX

reduction

UKPN Load CAPEX 1350.8 -109.6 -71.8 -37.8 -8%

Non load CAPEX 1319.3 -205.2 -85.5 -119.7 -16%

other CAPEX 315.4 -30.8 10.2 -40.9 -10%

NOCs 1304.2 -90.9 -27.3 -63.6 -7%

CAI & Smart-metering 1473.9 -131.6 -13.8 -117.8 -9%

BS & non Op CAPEX 820.7 -23.2 -9.0 -14.3 -3%

TOTAL 6584.2 -591.2 -197.2 -394.0 -9%

Totex

Submitted

£m

Totex

reduction

£m

Volume

reduction

£m

Cost

reduction

£m

TOTEX

reduction

UKPN Load CAPEX 1350.8 -93.6 -46.7 -46.9 -7%

Non load CAPEX 1319.3 -167.3 -68.8 -98.5 -13%

other CAPEX 315.4 -28.5 -0.2 -28.3 -9%

NOCs 1304.2 -115.1 -50.4 -64.7 -9%

CAI & Smart-metering 1473.9 -125.8 12.5 -138.2 -9%

BS & non Op CAPEX 820.7 -25.5 0.0 -25.5 -3%

TOTAL 6584.2 -555.8 -153.7 -402.1 -8%

• Innovation

– UKPN smart savings increased from £245m to £261m

– UKPN received 2 years of link box expenditure with no penalty under the TIM

– All companies to update their losses strategy, UKPN need to review losses benefits from smart metering

• Outputs

– UKPN and SP have had their CI and CML targets amended for their regional plans

– LI and HI targets will be flexed to reflect allowances

• Incentives

– No change from ED1 strategy decision

• Uncertainty

– New uncertainty mechanism for CNI and Link boxes, no other changes

Other key areas of change

13

Lessons learnt - Stakeholder engagement

• Ensure stakeholders understand how they can influence

the process

Evidence their understanding by providing a review

process earlier enough for them to comment

Focus on the key messages & process

Translate the outputs into outcomes (i.e. capacity added)

• A baseline explanation document should have been issued

with the original submission providing a simple picture of

how it all falls together for Ofgem and stakeholders

14

Any questions?

15

Our RIIO ED1 outcome commitments and

reporting

Eva Cahill

Corporate Social Responsibility Manager

16

• UKPN have made 77 Commitments in the following areas

RIIO - Outputs and Commitments

Customer Satisfaction Reliability and Safety Environment

Broad measure Complaints Real time customer information Publishing annual Data Stakeholder Engagement

Interruptions (CI) Restoration (CML) Asset Health (Health Index HI) Utilisation (Load Index LI) Worst Served Customers Flooding 12 hour Failures

Business Carbon Footprint Waste recycling SF6 leakage Cable fluid leakage Undergrounding in AONB Innovation for the environment Losses Noise

Connections Safety Social

Average time to Connect / Quote Guaranteed Standards compliance On line services Services for Generators – flexible connections Service Improvement

Deliver safety critical investments Reduce Total Recordable Injury Rate Reduce Lost Time Injuries (LTI) Achieve one year with no RIDDOR reportable LTIs Engage in public safety

Vulnerable customers Community engagement Fuel poor Employer of Choice

17

Outputs – ED1 hasn’t yet started but we are

focused on delivery of our promises Customer Satisfaction Reliability & Availability Environment

Connections Safety Social Responsibility

RAG definitions

● Completed/closed – 4%

● Progress/ performance

ahead of plan - 54%

● Delivery yet to be

completed – 36%

● Commitment yet to be

initiated – 6%

18

1. What are your views on the proposed structure? Does the proposed

structure appropriately split reporting between different annexes?

2. What are your views on the information we are asking the DNOs to

forecast?

3. We and DNOs may publish information contained in the RIGs. What

information would you like to see published? What format would you like to

see it published in and how often?

4. We are consulting in parallel on the Environment Report. Most of the data

to be included in the Environment Report will be collected in the RIGs.

What are your views on this approach? Do you think some or all of the

data in the Environment Report should be collected separately?

5. Specific comments on individual tables and their associated guidance and

definitions.

Ofgem Consultation on draft RIIO-ED1 RIGS

For more details please see Ofgem’s website:

https://www.ofgem.gov.uk/publications-and-updates/draft-regulatory-

instructions-and-guidance-electricity-distribution-networks

19

Reporting on our progress

• Annual Report

– from October 2016 Ofgem require an Annual Report on our

progress in the previous regulatory year on our performance

against the Business Plan commitments

Next steps • We want stakeholder feedback to help shape how and

what we report

• Collect stakeholder views from SPN, EPN & LPN

sessions and include in reports published on our website

• We plan to publish a first Report in late 2015, a year

earlier than required

• to give stakeholders an early view of our readiness and progress

• to get feedback on the form and content

20

Roundtable exercise facilitated by Eva, Andy & Alex to collect your

views on reporting our performance in the RIIO-ED1 period.

Your views, along with those of the stakeholders in the EPN & LPN

sessions, will be recorded in transcript reports for the session to be

published on our website and will form a key part of establishing what

we report.

• What are the key areas that you want us to report on and to what

detail?

• Should we prepare different reports for specific audiences or one

report?

• What formats/communication channels would you like the report in?

Questions

21

Our stakeholders’ priorities for 2015/16

Eva Cahill

Corporate Social Responsibility Manager

22

23

Prioritising stakeholder issues

• Carrying out exercises with external stakeholders and internally to

evaluate what issues relevant to our activities are most important

• We need to plan and prioritise our Stakeholder Engagement activity

for next year and beyond

• Initial analysis has identified 31 issues important to stakeholders, but

there may be others

• We are looking for you to tell us which of these issues are most

important to you

• Issues most important to both stakeholders and UK Power Networks

will have a specific focus in our stakeholder engagement plans for

the next four years

• We will produce a document to be published in April that will show

the result of our external and internal materiality exercises

Current understanding of stakeholders’ key issues

Ageing Workforce Fuel Poverty

Business Transformation Losses Capacity Constraints Major Connections Customer Service

Company Reputation Metal Theft Condition of Assets Overhead lines

Consumer Vulnerability Public and Employee Safety

Contracting Approach/Model Regulatory & Legal Compliance

Contributing to the Community Small Connections Customer Service

Cost to Customer Street Lights Crisis Management Streetworks

Critical National Infrastructure Supply Quality

Customer Service Supply Resilience

Developing Smarter Networks Tree Management Employee Engagement Wayleaves

Environmental Emissions Worst Served Customers

Financial Sustainability

24

2011. UK Power Networks. All rights reserved 26 26

Explanation of prioritisation exercise

Stage 2 On the sheets provided give you the chance to individually rank the ten most important issues to them for analysis of materiality that can be done per stakeholder group etc

Stage 3 A word cloud will be produced based on the roundtable prioritisation of issues for you to see what were the most important issues resulting from the group discussions. The individual prioritisation data will then be included to this data with the results showing the most important issues to you from the day available to view during lunch

Stage 1 Discuss in your roundtable groups the list of issues (any not listed can be included) and decide which are the ten most important to you collectively. The aim of this is to get a consensus view of the most important issues and facilitate discussion

2011. UK Power Networks. All rights reserved 29

Review of objectives

• To ensure a clear understanding of the

implications of Ofgem’s RIIO ED1 determination

• To gather your feedback on our proposed future

performance reporting & how we communicate

• To understand your business priorities

29

Thank you

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