Ofgem's updated gas distribution price control proposals

Ofgem consultation (112 pages, PDF) and supplementary appendices (165 pages, PDF) on updated proposals for the gas distribution price controls from 2008.

The cost of capital assumptions of the May 2007 proposals are retained in this update but changes are possible for the final proposals.

The productivity and input price trend assumptions are also kept in line with the initial proposals (i.e. 2.5 per cent annual productivity improvement combined with RPI+1 for direct labour and RPI+2 for contract labour). Results from a Reckon LLP analysis of productivity trends in other sectors are quoted in the supplementary appendices in support of the productivity assumption.

After considering it in previous consultations, Ofgem rejected the concept of a rolling incentive for operating expenditure because:

Under benchmarking, most GDNs' allowances are not set by reference to their own costs in the previous price control, but by reference to the benchmark.

Responses by Monday 22 October 2007.

For further information or advice please contact Franck Latrémolière.

Filed under Gas, Ofgem, Price controls.

Reckon LLP is an economics consultancy with expertise in data analysis, economic regulation and competition law.

About Reckon