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Thursday, September 21, 2017

Gas networks defend RIIO returns

The gas distribution networks (GDNs) have mounted a robust defence of their profits, with Cadent arguing that they have delivered "a step change in customer outcomes".

The comments come in the wake of high-profile criticisms of energy networks' "excessive returns". According to an analysis from the Energy and Climate Intelligence Unit, the networks are making an average 32 per cent profit margin. However, the Energy Networks Association (ENA) branded the analysis "deeply flawed".

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In its response to Ofgem's consultation on the next regulatory settlement, RIIO2, Cadent wrote: "The financial returns seen so far in RIIO-GD1, with some companies achieving low double-digit RoRE (Return on Regulated Equity) returns, have been the result of GDNs responding to the incentives within the regime to deliver significant service improvements whilst also driving cost reductions for customers, with 37p in every £1 of efficiency savings being returned to customers within the control period.

"If network companies had not responded to these incentives then they faced significant financial penalties which would have seen their financial returns fall to around or below the cost of debt."

Read the full story at Network