RIIO-2 Energy Price Control Regulations to be Implemented by 2020
New energy price control regulations are set to come into effect that will put a cap on the amount that distribution network operators can charge for their services.
This updated policy will replace current energy price control regulations.
What is RIIO?
RIIO is an acronym for an energy network regulation model that is to be implemented by Ofgem by the year 2020:
RIIO (Revenue = Incentives + Innovation + Outputs) is Ofgem’s performance-based framework to set the price controls – Ofgem
What are the current energy price controls?
Current energy price controls include RIIO-T1, RIIO-ED1 and RIIO-GD1. All of these regulations are due to end in 2021 when the new RIIO-2 price controls come into effect:
RIIO-T1 energy price control
This update belays what is expected of transmission network companies. It promotes efficient service delivery for energy customers.
RIIO-ED1 energy price control
This regulatory addition was the first RIIO framework price control to affect electricity distributors only. It provides incentives for delivering low-carbon, sustainable solutions that are value for money and controls the outputs that all distribution network operators need to deliver, as well as the amount of revenue that they can collect.
RIIO-GD1 energy price control
This energy price control is the gas network distributor equivalent to RIIO-ED1. This has been put into place to control gas distributor outputs, as well as revenue. It also incentivises providers to innovate their services to be more sustainable and value for money.
How will RIIO-2 price controls affect your business?
The RIIO-2 price control update will benefit homes and businesses throughout the UK.
Through this, Ofgem is aiming to put stakeholders at the heart of the distributor decision-making process. Future investments will continue to support safe, reliable services as well as innovations that will reduce network costs for all energy consumers.
Furthermore, your home or business may become eco-friendlier. When new changes come into effect, distributors will be expected to deliver more low-carbon, environmentally friendly services – so the energy that you use should come from greener sources!
When will RIIO-2 price controls start?
On 7th March 2018, a consultation was launched to review the new framework using a process that will help to highlight the next set of price controls. The review will cover the entire RIIO framework and assess the need for further change.
This process will take several years to implement throughout the energy market. Changes are set to be fully established by the end of 2020.