Should the equity market return methodology be changed for RIIO price controls?
The consultation was prompted by the UK Competition Commission's provisional findings for the Northern Ireland Electricity price control appeal. In Ofgem's judgement the Competition Commission had changed its approach to give greater weight to contemporary market evidence relative to long-term evidence.
Oxera's response recognised that Ofgem’s reasons for consulting were understandable. However, Oxera considered that it was not the right time to change the methodology, nor was the Competition Commission's estimate of the equity market return necessarily appropriate in the context of RIIO (Revenue = Incentives + Innovation + Outputs) price controls.