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Incentive-Based Regulation (RIIO Model)—Great Britain

  • December 2015
  • -
  • Frost & Sullivan
  • -
  • 51 pages

Introduction to Great Britain's Incentive-Based Regulation for Transmission and Distribution in the Gas and Electricity Market

The Office of Gas and Electricity Market (Ofgem) has implemented RIIO (setting Revenue using Incentives to deliver Innovations and Outputs) for the incentive-based regulation (IBR) covering the gas and electricity transmission and distribution network in Great Britain (England, Wales, and Scotland). The RIIO model puts the customer in the middle of the decision-making matrix. Targets are set on primary outputs covering customer satisfaction, safety, reliability, environmental connections, and social obligations. A second-level set of secondary outputs are subsequently incorporated in a detailed business plan to meet the primary output targets. The IBR period (price control period) is set for 8 years, which aligns with asset investment decisions better than the 5-year period. Wider industry participation is supported using innovation funds controlled by Ofgem.

Executive Summary
- The Office of Gas and Electricity Markets (Ofgem) regulates the transmission and distribution networks for gas and electricity in Great Britain (England, Wales, and Scotland).
- The price control regulation is referred to as RIIO and is similar in concept to the Incentive-Based Regulation (IBR) in Peninsular Malaysia.
- The price control is applied through an output-driven model that covers primary outputs as required by stakeholders (customers, regulators, etc.) and secondary outputs, which
enable the targets.
- Network companies submit an 8-year business plan for meeting the primary output targets and also cover the secondary outputs, which enable the primary targets.
- The RIIO price control also enables innovation fund development through a share from the revenue of the network companies.

Table Of Contents

Incentive-Based Regulation (RIIO Model)—Great Britain
Executive Summary
Executive Summary

Great Britain (GB) vs. the United Kingdom (UK)
Great Britain (GB) vs. the United Kingdom (UK)

Ofgem—Great Britain's National Regulatory Authority
Office of Gas and Electricity Markets
Standing of Ofgem in Europe
Recent News from Ofgem

Great Britain's Electricity Market
Electricity Market Structure—Comparison
UK Generation Mix (2014)
Great Britain—Transmission Operators (TOs) and System Operator (SO)
Great Britain—Distribution Network Operators (DNOs)

RIIO
RIIO Model
RIIO Highlights
RIIO Stages
Outputs and Price Control Methodology—Principle (Electricity)
Outputs and Price Control Methodology—Primary Output
Cost Benefit vs. Price Control Periods
Outputs and Price Control Methodology—Revenue
RIIO—Innovation Framework

Implementation of RIIO Model
NGET—RIIO Timeline
Network Performance—Electricity Transmission Under RIIO
News Roundup

Case Reference—Network Operators
Network Operator Viewpoint—Reference from SSE
National Grid Electricity Transmission (NGET)—Primary Deliverable
NGET—Output Total Cost Share
NGET—Reliability and Availability
NGET—Innovation
Legal Disclaimer

Appendix
Retail (End Prices) for Households (2013)

The Frost and Sullivan Story
The Frost and Sullivan Story
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Global Perspective
Industry Convergence
360º Research Perspective
Implementation Excellence
Our Blue Ocean Strategy

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