Republication of RIIO-GD2 Price Control Financial Model following the Annual Iteration Process 2022
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RIIO-2 Annual Iteration Process 2022 for Gas Distribution
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On 30 November 2022, Ofgem published the results of the Annual Iteration Process (AIP), for the Gas Distribution (GD) licensees under the RIIO-2 network price controls. The AIP updates allowed revenues, which licensees must use when setting their charges for the next regulatory year (2023/24).
Part B of Special Condition 8.2 in the GD licence specifies that the Authority may re-publish the value of Allowed Revenue (ARt) and Adjusted Revenue (ADJRt) after 30 November and before the 30 January prior to each regulatory year.
This re-publication process is set out in further detail in Chapter 2 of the GD2 Price Control Financial Handbook and enables licensees to reflect the impact of any unforeseen events on their allowed revenue in time for them to set tariffs, where these events have or are estimated to have a material impact on their allowed revenues.
Since the publication of the AIP in November 2022, there have been material changes to the following values in the GD2 PCFM:
- Inflation – The release of the autumn forecast was delayed to 17 November 2022 by the Office of Budget Responsibility (OBR) and it was too late to incorporate it in the November 2022 AIP. Updating the inflation forecast has resulted in an increase in allowed revenues.
- Shrinkage– Shrinkage reflects the cost of gas lost from the gas distribution network. There has been a reduction to the shrinkage forecast resulting in a material decrease in allowed revenues.
- Prescribed rates –These rates were updated by the Valuation Office Agency in November 2022 for all GD licensees and had a material downward impact on allowed revenues.
- Supplier of Last Resort (SoLR) costs – SoLR cost estimates have now been updated in line with the final position directed by Ofgem on 20 December 2022.
The Authority gave the GD licensees notice of the value of ADJRt and ARt on 12 January 2023.
The reason for and effect of this re-publication is to revise the PCFM Variable Values to re-calculate the values for the Allowed Revenue and Adjusted Revenue terms for the GD licensees.
The re-published values for ADJRt and ARt following the November 2022 AIP are shown within the GD2 Price Control Financial Model published on this page.
Main document
[Republished GD2 PCFM November 2022 [XLSM, 1.47MB]
](https://www.ofgem.gov.uk/sites/default/files/2023-01/Republished%20GD2%20PCFM%20November%202022.xlsm)
Related links
RIIO-2 Annual Iteration Process 2022 for Gas Distribution