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RIIO-T2 Business Plan Annexes

Below are Annexes and Digitisation Strategy in support of our RIIO-T2 Business. For clarity we have also produced a summary document of the publication status of our Annexes and Supporting Documents.

Annex Publication Summary

For clarity we have collated a complete list of all documents submitted in support of our business plan to Ofgem. Due to the sensitive nature of some of this information we cannot publish all of the documents in full. The summary document provides a publication status of this vast volume of supporting information. We have fully published the large majority of information however, where we have published a redacted version or not published a document we have provided an explanation. The engineering justification tab also acts to provide a full list of our named projects collated together.

Annex 1: Investment Packs

Engineering Justification papers have been provided for all of our major expenditure areas, and where relevant a Cost benefit analysis to show the financial appraisal of different options considered.

Engineering Justification Papers

Cost Benefit Analysis

Supporting Documentation

Annex 2: Sustainable Workforce Strategy

Our Sustainable workforce strategy sets out how we will ensure a workforce fit for the future. This includes delivering a modern; diverse; high quality; well-trained and resilient workforce within our baseline regulatory settlement, without any additional funding or incentives.

Annex 3: Strategic Investment Plans - Non Load

This annex provides a more detailed explanation of the investment planning process and asset risk movements.

Annex 4: Strategic Reinforcements

This annex provides a strategic overview of the boundary upgrade projects which are considered as part of the Network Options Assessment Process. These projects have a degree of interdependence and are coordinated with other Transmission Owners. This annex complements the engineering justification papers for individual boundary upgrade projects.

Annex 6: Innovation Strategy

This annex provides more detail on our strategic focus, ambitions and culture of innovation. It provides a detailed breakdown of the proposed expenditure and expected benefits of our innovation activities in RIIO-T2.

Annex 7: Environmental Action Plan

This Annex provides a comprehensive review of the environmental impact of our network and identifies the actions we will take during RIIO-T2 to address the opportunities and challenges these impact areas present.

Our Sustainable Business Strategy has been updated since the submission of these Annexes in December 2019.

Annex 8: Cost benefit Analysis Process

This annex explains how we have used Cost Benefit Analysis to determine the investment option that provides the most economical outcome for consumers.

Annex 9: Cost of Capital NERA Report

We commissioned NERA Economic Consulting (NERA) to estimate the cost of equity and to assess the correct optimal trailing average to use in the cost of debt indexation mechanism, including an estimation of the halo effect and to set out estimates of the additional costs of borrowing, for the RIIO-2 price control period.

Annex 10: Real Price Effects NERA Report

We commissioned NERA Economic Consulting (NERA) to advise on the appropriate treatment of real input price inflation, known widely as Real Price Effects (RPEs), and ongoing productivity improvement over the RIIO-T2 control period from 2021/22 to 2025/26. RPEs capture expected changes in the input prices faced by us, relative to general inflation.

Annex 11: Business Plan Data Tables

Annex 11 sets out proposed cost, volume and output delivery information for RIIO-T2 period in a format determined by Ofgem. It covers both qualitative and quantitative information that will be used by the regulator to better understand the submission by the licence company and facilitate a full and proper assessment of the investment (Totex) on the network requirement for the RIIO-T2 price control period.

Annex 12: Output Incentives

In RIIO-2, output delivery incentives (ODIs) will apply where service quality improvements beyond a level that is funded through base revenues may be in the interests of consumers. Our annex sets out our proposed ODIs based on feedback from our stakeholders, including Willingness to Pay studies. For each incentive, we have explained how this will operate, including all relevant performance targets.

Annex 13: Investment Process

This annex describes the structured process we use to identify investments. It describes our internal governance processes to ensure that the work we do has the right scope and that our investments are economical, efficient and co-ordinated. This has not been published to due to commercial sensitivity.

Annex 14: Planning Scenarios Baringa Report

This is an independent report provided by Baringa Partners to detail the methodology and results of the Future Energy Scenarios that have been used to underpin our load related expenditure.

Annex 15: RIIO-T2 Central and Southern Scotland Electricity Scenarios 2019

A summary of the Future Energy Scenarios which was published earlier this year and summarises the detailed analysis undertaken by Baringa.

Annex 16: NERA - Risk Modelling for RIIO-T2

We have worked with NERA to develop a financeability risk model, based on Ofgem’s Price Control Financial Model. This paper sets out the methodology that underpins our approach to modelling our approach to financability risk.

Annex 17: RIIO-T2 Project Team

This Annex provides an overview of the RIIO-T2 project team and the experience of the work stream leads.

Annex 18: Competition Plan

We have a responsibility to develop and maintain an economic, efficient and coordinated transmission network. We extensively use market driven competition to do this for the benefit of consumers. Our Competition Plan sets out our existing competitive processes called “Native Competition”. The plan also focuses on Ofgem’s proposed competition models referred to as "Early" and "Late" competition. In addition, our Competition plan also sets out which RIIO-T2 price control projects we believe meet the criteria for Ofgem’s "Early" and "Late" competition models.

Annex 19: Investment Plan Additional Analysis

This annex provides a more detailed analysis of the Load and Non-Load related investment plans, and the network operations plan. This includes analysis of the costs and activity levels of the main categories of expenditure compared to RIIO-T1.

Annex 20: Uncertainty Mechanisms

A detailed justification of the various uncertainty mechanisms that are proposed in the Business Plan.

Annex 21: Strategic Investment Plan Load

A summary of the process that has been taken to create the load related expenditure plans and the interaction between various projects.

Annex 22: Supply Chain

Supply Chain – Details of the engagement we have undertaken with our supply chain to ensure our confidence in our ability to deliver our plan and fulfil the ambitions we have set out.

Annex 23: Our Assurance Framework

This Annex provides an overview of the risk assessment methodology used for our risk-based Assurance framework. Information is also provided on our external assurance providers.

Annex 24: Business IT Security Strategy

This annex provides information on our forecast activities for cyber security related to business IT systems. This has not been published due to the sensitivity of the content.

Annex 25: Finance

Our Finance Annex explores in more detail our approached to financing our plan. We have performed a full review of all financial information requested in Ofgem guidance and Consumer Challenge Group correspondence, as well as any information we believe to be relevant to our business plan.

Annex 26: Financial Model

Annex 26 contains the financial data templates that Ofgem requires us to complete in order to derive our revenues, financial statements and ratios that underpin our overall financeability assessment. This is Ofgem’s Business Plan Financial Model (BPFM).

Annex 27: Track Record

This annex contains the documents provided in response to an information request from the RIIO2 Consumer Challenge Group in the first half of 2019. This provides detailed analysis and commentary on the TPCR4 and RIIO-T1 periods. This has not been published due to the detailed costs that they contain and the associated commercial sensitivity.

Annex 28: Strategy for Engaging Stakeholders in RIIO-T2

Our comprehensive strategy for engaging with our stakeholders during the RIIO-T2 period, including a series of annual performance commitments.

Annex 29: Estates

This annex provides further information on our organisation and operation of our Fleet, Estates and Building support operations.

Annex 30: CVP Assumptions

Details of the Consumer Value Propositions (CVPs) included in our plan including the assumptions which underpin them.

Annex 31: Output Summary

Snapshot table as requested by Ofgem in their Business Plan Guidance.

Annex 32: Cyber Resilience Plan

This annex details our activities for Operational Technology cyber security, including activities to ensure compliance with the Network and Information Systems directive. This has not been published due to the sensitivity of the content.

Annex 33: Sharing Factor

Our views on an appropriate totex incentive sharing factor for our RIIO-T2 plan based on a review of the various parts of the plan.

Annex 34: Our Supplementary Business Plan

Ofgem’s working assumptions, particularly around the cost of equity, are not aligned to our views. We believe a higher rate of return is necessary based on the risks and challenges we face. This annex provides details of our analysis based on the advice of independent economic advisers and the support we have received from stakeholders. It is important that this is viewed in the context of the full plan.

Annex 35: Consolidated Network Access Policy Proposal

All Transmission Owners are required to develop one consolidated Network Access Policy (NAP). The purpose of the NAP is to facilitate efficient performance and effective liaison between the ESO and the TOs in relation to the planning, management and operation of the transmission system for the benefit of consumers. Within our Output Incentives Annex, we have provided a milestone plan which highlights the key dates and stages involved in turning our RIIO-T2 draft Network Access Policy proposal document into a final industry approved document by the 31st December 2020, ready for implementation on 1st April 2021.

Annex 36: Engineering and Corporate Support

Annex 36 explores in more detail our indirect support costs for both engineering and corporate services, setting out what these costs represent and how they compare to RIIO-T1 and the wider industry.

Digitalisation Strategy

 
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