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Blog - Ensuring Regulation & Policy is fit for a Net Zero world

28/03/2024

David BoylandBlog by David Boyland, Head of Transmission Regulation and Policy, SP Energy Networks (SPEN) 

There are 9 months to go until our RIIO-T3 Business Plan is published in December this year. This blog gives an overview of the important role of SPEN’s Regulation and Policy Team, and regulatory frameworks and standards in the RIIO-T3 planning process. If you don’t have time to read the full blog, scroll to the end or click here for my top 3 key points.

IntroductionMap of UK showing SP Transmission license area in central and southern Scotland

As a transmission and distribution network owner, we play a critical role in enabling the transition to a cleaner, future – supporting both the Scottish and UK Government to reach their Net Zero targets. SP Transmission plc is a wholly owned subsidiary of SPEN. We are responsible for the transmission of electricity in Central and Southern Scotland. 

Our RIIO-T3 Business Plan will set out our proposed investment in the transmission network in Central and Southern Scotland for the 5 years between 2026 to 2031. Our investment plan will be critical in enhancing energy security for Scotland and beyond, alongside helping protect society from the dangers of climate change whilst delivering revolutionary economic growth through good green jobs and community benefits.  

Our license obligations

As a natural monopoly, the planning, design and investment in the electricity network is governed by a range of standards and regulations, set by the GB regulator Ofgem. We have license obligations to meet which ensure the work we undertake is economical, efficient and coordinated. All whilst ensuring that we keep the lights on for the homes and businesses that we serve through ensuring the safety, resilience and security of our network.  

Our Regulation and Policy Team

The robust regulation of GB networks plays a critical role in ensuring that network owners not only abide by their license obligations but also that they are sufficiently and economically financed to deliver what is required for society. Our Regulation and Policy Team is at the centre of this. We ensure that the business works within our license and we act as the key conduit to Ofgem.

Alongside this we are responsible for ensuring that regulatory funding allows the efficient delivery of our Business Plans and strategic infrastructure projects through Accelerated Strategic Transmission Investments (ASTI).  

David Boyland presenting at T3 Team meeting We have a dedicated team supporting the development of the RIIO-T3 Business Plan. The development of a robust, pragmatic and ambitious business plan requires the appropriate regulatory frameworks and funding mechanisms that will allow SPEN to deliver national critical infrastructure at pace. Our job in the Regulation and Policy Team is to ensure that both Ofgem and the business are considering the appropriate incentives through RIIO to allow this to happen. 

As our industry continues to adapt to mobilise the delivery of Net Zero, our Regulation and Policy Team are also responsible for a host of everchanging policy developments.  We continually advocate for the needs of our stakeholders and customers, our business and the importance of certainty to ensure investor confidence to deliver Net Zero.  

To do this we have 8 regulatory strategic objectives which we work with our business experts to deliver. We expect a significant level of change throughout the remainder of RIIO-T2 and through RIIO-T3 across a broad range of areas. Having sight of these policy developments as early as possible and assessing their impact will be critical in the delivery of RIIO-T3 something in which we have urged Ofgem to provide certainty on at the earliest point.  

Our 8 regulatory Strategic Objectives are: 

  • Ensuring resilience and security of supply 
  • Advocating for connections reform 
  • Monitoring the introduction of the National Energy System Operator and new strategic planning methods 
  • Accelerating transmission investment – including planning reform and community benefit 
  • Financing the transmission transition 
  • Responding to climate change through our actions 
  • Monitoring and influencing the political environment 
  • Enable better whole system outcomes 

RIIO-3 Sector Specific Methodology ConsultationRIIO-3 Sector Specific Methodology Consultation

The Net Zero Transition and energy security is key to growing the UK economy. 

On 6 March 2024, we reached an important milestone in the development of our RIIO-T3 Business Plan by submitting our comprehensive response to Ofgem’s RIIO-3 Sector Specific Methodology Consultation (SSMC).  

This consultation is a key step in informing Ofgem’s decisions that are critical to the development of the Electricity Transmission (ET) network and Gas Network investment plans between 2026 to 2031. 

Our response outlined that the effective and efficient delivery of unprecedented transmission investment at pace during RIIO-T3 is critical to support both the Scottish and UK Government priorities. To deliver these priorities the RIIO-T3 regulatory funding framework must promote the necessary investment whilst balancing the appropriate flexibility to manage uncertainty. The key themes we outlined in our response were: 

  • Process - Challenging timescales leave no room for error and could compromise stakeholder engagement.
  • Cost Assessment - Should focus on engineering review of needs case and optioneering. Recent extreme volatility will have a significant impact on the validity of historical costs as benchmarks.
  • Finance - It is critical that Ofgem ensure Transmission Owners (TOs) remain investable when investment levels will more than double from T2 investment levels.
  • Major Projects Regime - Early funding is vital to efficient network investment. Delivery incentives should be well targeted and regulatory trust and certainty are needed to secure and develop the supply chain.
  • Independent Technical Advisor - Consideration of the challenges of procuring ITA. Need to be effective through the lifetime of projects without compromising delivery.
  • Incentives - Significant changes are required from T2 given the challenges the ET sector is facing and ongoing reforms.
  • Totex Inventive Mechanism - Change is necessary. The sharing factor should be separate from Business Plan Incentive to provide suitably strong efficiency incentives whilst providing suitable levels of protection to unprecedented cost rises.
  • Business Plan Incentive - Support the simplification of minimum requirements.
  • Scale of industry reform - Certainty is required in light of extensive reforms being proposed. 
  • Long lasting Community Benefits - Clarity required on policy funding options and reporting.

There has been a wholesale change in the balance of risk and reward for all stakeholders, the risk of not achieving Net Zero cannot be overstated. Increasing capital investment is required to unleash meaningful benefits not only to decarbonise but to delivery economic growth and reduce the costs of constraints on consumers electricity bills. The past is not a good indication of the future, we are in a global race to deliver unprecedented large scale infrastructure projects, early and accelerated regulatory funding and certainty over delivery is critical to allow this to happen efficiently. 
 
So, what’s next? Ofgem will publish its Sector Specific Methodology Decision (SSMD) in Q2 2024, setting out the high-level regulatory framework and guiding the development of our RIIO-T3 Business Plan.  

Stakeholder EngagementMembers of the Independent Net Zero Advirsory Council (INZAC). From Left to Right; Matthew Cole, Dan Thomas, Martin Kearns, R

Stakeholders are key to the development of our RIIO-T3 Business Plan. There will be engagement opportunities coming up this year, giving you the chance to shape our proposals. Complete this online form to Register as a Stakeholder.   

Members of our Independent Net Zero Advisory Council (INZAC) will also be supporting the development of our Business Plan, scrutinising both the technical plans as well as ensuring any emerging customer issues are fully considered. 

Stay up to date via our dedicated RIIO-T3 page which will be updated regularly with our progress and opportunities for engagement.  If you have any enquiries about our RIIO-T3 Business Plan, please email us on riio-t3pmo@spenergynetworks.co.uk


The top 3 takeaways from this blog are: 

  • We are developing our RIIO-T3 Business Plan which will be published in December 2024.  
  • We have submitted a comprehensive response to Ofgem’s Sector Specific Methodology Consultation (SSMC) and await the Decision being published in Q2 2024.  
  • Register as a Stakeholder to keep up to date with engagement opportunities. 

Readers may also be interested in our other RIIO-T3 blogs: 


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