SSEN Transmission Engages with Ofgem’s RIIO-T3 Draft Determination Consultation: Key Insights and Reactions

Energy Network Investment Faces Hurdles as SSEN Transmission Urges Regulatory Changes

London, United Kingdom – august 27, 2025 – A critical juncture has been reached in the United Kingdom’s energy infrastructure development as SSEN Transmission has formally responded to proposals from Ofgem, the energy regulator. The company is advocating for ample revisions to the RIIO-T3 price control framework, asserting that the current plan falls short of delivering the necessary investment to achieve aspiring national energy goals.

The Importance of Transmission Network investment

Investment in the nation’s electricity transmission network is considered paramount to realizing the UK and Scottish Governments’ commitments to energy security, clean power generation, and achieving Net Zero targets. SSEN Transmission contends that strategic investment can also lower consumer costs by facilitating the wider adoption of domestically produced,low-carbon energy sources.

Areas of Concern Outlined by SSEN Transmission

While acknowledging some positive movement in Ofgem’s initial proposals, SSEN Transmission maintains that a more robust and ambitious framework is essential.The company’s detailed response highlights four critical areas requiring modification to ensure prosperous implementation of Clean Power initiatives.

A Viable Financial Framework is Crucial

SSEN Transmission asserts that the proposed financial parameters must attract investment. Specifically,the company is urging Ofgem to raise the baseline Cost of Equity to a minimum of 6.5% to provide investors with a competitive return, aligning with global market standards.Strengthening cash flow measures, with aggregate capitalisation rates capped at 80% and a 35-year asset life for new projects, are also deemed essential for investor confidence.

Incentivizing Performance and Innovation

A more effective incentive structure is vital for driving optimal network performance, according to SSEN Transmission. The company is advocating for tangible rewards for exceeding performance targets and standardization of methods assessing indirect costs to eliminate potential penalties based on unreliable comparisons.

Securing Full Funding for Key Projects

Addressing funding gaps within the baseline total expenditure is a primary concern. SSEN Transmission is requesting that Ofgem aligns indirect resources with the broader Clean Power 2030 and Net Zero objectives. The company also suggests that benchmarking methodologies should account for the scale of growth anticipated through 2031, shifting away from historical trends.

Streamlining Regulatory Approvals

To accelerate the deployment of crucial energy infrastructure,SSEN Transmission calls for the simplification and automation of regulatory approvals for all projects aligned with the Clean Power 2030 plan. Moving away from prolonged ‘reopener’ processes and automating funding release to match actual project needs are proposed as vital steps to avoid delays.

Did You Know? The UK government has committed to achieving Net Zero emissions by 2050, requiring substantial upgrades to the electricity transmission network.

Area of Focus	SSEN Transmission’s Key Request
Financial Framework	Raise Cost of Equity to 6.5%
Cash Flow Measures	Capitalisation rates ≤ 80%, Asset Life 35 years
Incentive Framework	Robust incentives for performance
Funding	Address funding shortfalls, align resources with Net Zero
Regulatory Decisions	Streamline and automate approvals

SSEN Transmission has pledged continued collaboration with Ofgem to ensure the final price control settlement supports the substantial investment necessary to realize the UK’s ambitious energy vision. The coming months will be critical in determining whether a mutually agreeable framework can be established to safeguard the nation’s energy future.

Pro Tip: Staying informed about energy infrastructure developments is crucial for understanding the long-term implications for consumers and businesses.

What impact will these potential changes have on your energy bills? How significant is energy independence to the UK’s long-term security?

Understanding the RIIO-T3 Framework

The RIIO-T3 (Revenue = Incentives + Innovation + Outputs – Transmission) price control framework sets the financial parameters for electricity transmission network companies in Great Britain. It covers the period from 2021 to 2026 and determines how much revenue these companies can earn, incentivizing them to deliver reliable, efficient, and sustainable energy infrastructure.

The framework is designed by Ofgem and aims to balance the interests of consumers with the need for investment in the network. It includes incentives for companies to reduce costs, improve performance, and innovate, and also penalties for failing to meet targets. Key aspects include setting allowed revenues, establishing performance targets, and defining investment allowances.

Frequently Asked Questions About Energy Investment

• What is ‘Net Zero’ and how does it relate to energy investment? Net Zero refers to achieving a balance between emissions produced and emissions removed from the atmosphere. Significant investment in renewable energy and the transmission network is vital for achieving this goal.
• What is the role of Ofgem in the energy sector? Ofgem is the independent energy regulator for Great Britain, responsible for protecting consumers and promoting competition in the energy markets.
• Why is investment in electricity transmission networks so important? Modernizing the transmission network is essential for integrating renewable energy sources, ensuring grid stability, and delivering secure and affordable energy to homes and businesses.
• What are the potential consequences of underinvestment in energy infrastructure? Underinvestment can lead to power outages, increased energy costs, and hinder the UK’s ability to meet its climate change targets.
• How does the Cost of Equity impact energy investment? The Cost of Equity represents the return required by investors. A lower Cost of Equity can discourage investment and make it harder to finance critical infrastructure projects.
• What is a ‘reopener’ in the context of funding approvals? A ‘reopener’ refers to a process where Ofgem can revisit and perhaps adjust the funding allocated to a project, creating uncertainty and potentially delaying progress.
• What is meant by ‘automate approvals’? Automating approvals for pre-defined projects is streamlining the regulatory processes, reducing bureaucracy and accelerating the delivery of essential energy infrastructure.

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How might the proposed RIIO-T3 framework impact the ability of regions with high renewable energy potential, like the North of scotland, to contribute to national net-zero targets?

Understanding the RIIO-T3 Framework & Its Significance

Ofgem’s RIIO-T3 (Revenue = Incentives + Innovation + Outputs – Transmission) price control framework, spanning 2021-2026, is pivotal for shaping the future of electricity transmission infrastructure in Great Britain. It dictates how network companies like SSEN Transmission (Scottish and Southern Electricity Networks transmission) are incentivized to deliver reliable,efficient,and lasting electricity networks. The recent draft determination consultation marks a crucial stage, outlining Ofgem’s initial views on allowed revenues and performance targets. This impacts investment in crucial grid upgrades needed for net-zero targets and increasing renewable energy capacity. Key areas of focus within RIIO-T3 include network resilience, innovation, and cost efficiency.

SSEN Transmission’s Core Response to the Draft Determination

SSEN Transmission has actively engaged with Ofgem throughout the RIIO-T3 process, submitting a detailed business plan and responding comprehensively to the draft determination.Their core arguments center around ensuring sufficient funding to deliver critical infrastructure projects, particularly those supporting the transition to a low-carbon economy.

Here’s a breakdown of their key reactions and proposed adjustments:

Investment in Critical Infrastructure: SSEN Transmission argues the draft determination underestimates the investment required for essential grid upgrades. These upgrades are vital for connecting new renewable energy sources (wind farms, solar farms) and reinforcing the network to handle increased electricity flows. Specifically, they highlight the need for substantial investment in the North of Scotland, a region with significant renewable energy potential.

Deliverability of Net-Zero Targets: A central theme of SSEN Transmission’s response is the link between adequate funding and the UK’s ability to meet its legally binding net-zero commitments. They contend that underfunding transmission infrastructure will create bottlenecks, delaying the connection of renewable projects and hindering the decarbonization of the energy system.

Innovation Incentives: SSEN Transmission welcomes Ofgem’s focus on innovation but believes the proposed incentives need strengthening to encourage ambitious projects that can deliver significant benefits to consumers and the environment. They advocate for a more flexible approach to innovation funding, allowing for greater risk-taking and experimentation.

Cost Efficiency & Value for Money: While acknowledging the importance of cost efficiency, SSEN Transmission emphasizes the need to balance cost control with the delivery of reliable and resilient infrastructure. They argue that overly aggressive cost reduction targets could compromise the quality and longevity of network assets.

Key Areas of Disagreement & Proposed Solutions

Several specific areas of disagreement have emerged between SSEN Transmission and Ofgem in the RIIO-T3 draft determination.

Here’s a closer look:

1. Allowed Revenue: SSEN Transmission believes the draft determination’s proposed allowed revenue is insufficient to deliver its planned investment program. They are seeking a revised settlement that reflects the true cost of delivering the necessary upgrades.
2. Output Delivery Incentives (odis): The ODI framework incentivizes companies to meet pre-defined performance targets. SSEN Transmission has raised concerns about the complexity and potential unintended consequences of some of the proposed ODIs, particularly those related to reliability and customer service. They propose a more streamlined and outcome-focused approach.
3. Risk and Uncertainty: The RIIO-T3 period is characterized by significant uncertainty, including the pace of renewable energy deployment and the impact of climate change. SSEN Transmission argues that the draft determination does not adequately reflect these risks and proposes a more flexible approach to funding that allows for adjustments in response to changing circumstances.
4. Interim Funding: SSEN Transmission has requested interim funding to allow critical projects to continue while the final determination is being made.this is particularly vital for projects that are already underway and have significant implications for renewable energy connections.

Impact on Renewable Energy Connections & Grid Capacity

The RIIO-T3 settlement will have a direct impact on the ability of renewable energy developers to connect to the grid. Insufficient investment in transmission infrastructure will lead to:

connection Delays: renewable projects will face longer delays in securing grid connections, hindering the deployment of new capacity.

Curtailment of Renewable Generation: Existing renewable generators may be forced to curtail (reduce) their output due to grid constraints, wasting valuable clean energy.

Increased Costs for Consumers: delays and curtailment will ultimately lead to higher costs for consumers, as renewable energy becomes less competitive.

Regional Disparities: Areas with high renewable energy potential,such as the North of Scotland,will be disproportionately affected by underinvestment in transmission infrastructure.

The Role of Stakeholders & Future Consultation Stages

The RIIO-T3 process is not solely a dialogue between Ofgem and network companies. A wide range of stakeholders, including renewable energy developers, consumer groups, and environmental organizations, have a vested interest in the outcome.

consumer Advocacy: Groups like Citizens Advice are actively scrutinizing the proposals to ensure that consumers receive value for money.

renewable Energy Industry Input: RenewableUK and other industry bodies are advocating for a settlement that supports the rapid deployment of renewable energy.

* Environmental Concerns: environmental organizations are emphasizing the importance of investing in a sustainable and resilient electricity network.

The consultation process continues with further stages planned, including a hearing