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ESO extends ambitions for RIIO-2

Josephine Lord Consultant

The Electricity System Operator (ESO) issued the second draft of its business plan that sets out its approach for the RIIO-2 price control on 1 October. In this Perspective, we consider some key aspects of the plan and the ESO’s evolving role. Branching out The ESO became a legally separate entity within the National Grid Group on 1 April 2019, with the intention that this would allay concerns around potential conflicts of interest between controlling flows on to and also owning transmission wires. Separation also provides greater transparency around its decision-making. At the same time, Ofgem has been refining a new framework for the ESO’s incentive arrangements, moving from mechanistic formulas heavily focused on how well balancing costs are controlled, to a much broader score-card approach that requires the ESO to set out plans and goals across a spectrum of activities. The latest iteration of its draft business plan, issued at the start of October, is a weighty – arguably sprawling and repetitive - document, with the main plan running to over 200 pages, supplemented by an executive summary and a series of annexes. The final plan is due to be submitted in December and the ESO has invited further feedback ahead of this. Spending will be approved on a two-yearly basis, although the detail on the funding model that will underpin this is still being finalised. This and the incentive arrangements - which are itself evolving - will be critical in steering the ESO going forwards. Themes and principles ...

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