RP7 Stakeholder Consultation WEB - Flipbook - Page 57
9. Managing Uncertainty
We are confident that our monitoring
strategy and ‘Flexibility First’ strategy
will help manage uncertainty in the RP7
period, however, we also agree with the
Utility Regulator in its RP7 approach
consultation that new mechanisms will
be required to manage uncertainty, in
particular uncertainty regarding the
uptake of LCTs across society. These
mechanisms will need to be carefully
designed to ensure that they facilitate
the selection of longer term optimum
investment decisions, whist delivering
suitable protection for both our
customers and the network.
There is still work ongoing to determine
the best uncertainty mechanisms for
inclusion in our RP7 business plan,
however, we believe that the following
principles should be reflected in the
design of uncertainty mechanisms.
•For large, individual projects
where there is significant scoping
and planning work required, we
believe that these projects should
be considered as part of project
approval mechanisms, when pre-
construction activity is complete
and accurate costings have been
produced. This approach reduces
the financial risk to both the
customer and NIE Networks.
•We will install monitoring and trial
solutions early in RP7 to ensure
that we are only investing where it
is absolutely needed and that our
solutions are optimal over the long
term. Therefore, if the results from
the monitoring or trialling identifies
the need for additional expenditure,
a reopener mechanism will be
required to receive cost recovery.
•For LCT related investment, ex-ante
allowances for the full RP7 period
will be required with flexible and
agile uncertainty mechanisms
adopted to adjust allowances when
LCT uptake is above or below
forecasts. We do not believe that a
mid-term reopener is appropriate, in
this instance, as such a mechanism
is unlikely to be sufficiently agile or
efficient, unlikely to promote longer
term decision making and unlikely
to facilitate our ‘touch the network
once’ approach, due to the lack of
certainty around cost recovery in
the latter half of the period. Instead,
we believe that a clearly established
allowance amount which can be
varied with the volumes required
will be more effective than a reopener mechanism.
Whilst there remain uncertainties as
to the pace and precise nature of
where and when investment during
RP7 will be needed, we plan to work
with the Utility Regulator to ensure
that the price control framework has
sufficient flexibility and agility to enable
investment to be delivered in a timely
manner.
Q26. Do you agree with
our principles for managing
uncertainty in RP7?
RP7 Stakeholder Consultation
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