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National Grid Submits Response To Ofgem On RIIO T2 Consultation

Electricity and gas utility company National Grid PLC (NG.L,NGG) announced Friday that it has now submitted its response to Ofgem on the sector specific methodology consultation for RIIO-T2.

The company noted that the overall framework proposals set out by Ofgem in the sector specific consultation are a step in the right direction. But, the firm is concerned that the proposals, as currently set out, will not bring about the change consumers need.

In its response, the company outlined the importance of a framework that fairly reflects the risk-return balance for consumers and investors alike. Specifically, the firm shows that rectifying the individual errors in the current proposal, taking a balanced view of the full suite of evidence and removing the unjustified 50 basis points outperformance adjustment results in an allowed return on equity of 5.5% (real RPI basis).

National Grid also highlighted that incentive based regulation has driven at least 15 billion pounds of long term consumer value in electricity transmission over the last 25 years and encourage Ofgem to re-embrace the concept of incentivisation to deliver innovation and efficiency.

The company said the changes it proposed are in the long-term interests of consumers and will better enable the transition to a secure, resilient, low carbon energy system.

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