RIIO spelled out...
The total income that our transmission business can earn comes from three sources below: incentives, innovation and outputs.
The business’ main income comes from earning a return on the assets it builds and maintains and we have a number of outputs associated with the timely delivery and maintenance of these assets . The business can also earn or lose money through Ofgem incentive schemes; for example, in environmental management or stakeholder satisfaction.
The business can also earn money by successfully developing innovative solutions to the problem of providing a better network at lower cost.
Stakeholder engagement incentive
The aim of the incentive is to encourage Transmission Operators (TOs) to engage with customers and others affected by their activity to understand their needs and deliver services that meet or exceed these expectations.
The overall incentive package is calculated as a percentage of our annual allowed revenue at 1% of our revenue.
The incentive consists of three components. Our performance against each of these components determines the level of penalty or reward we are eligible for each year within the current RIIO-T1 price control period.
Annual Satisfaction Survey
Once a year, we are required to carry out a survey to assess how satisfied those affected by or interested in our activities are with our performance. We will ask respondents to rate their overall satisfaction with our performance, on a scale of 1 to 10.
Annual performance against Key Performance Indicators
We are required to develop a number of KPIs that will provide a transparent and objective means for a range of parties to assess the quality of the service we provide.
To ensure we are engaging with our customers and other stakeholders in line with our stated approach, we are also required to seek independent confirmation that we have followed the approach we have committed to.
Incentivising excellent environmental management
Throughout the RIIO-T1 price control period, Ofgem will conduct an annual competition to give transmission owners the opportunity to demonstrate their approach to looking after their environment.
The Environmental Discretionary Reward invites all transmission owners to apply for a financial incentive according to scoring on six criteria:
Should our transmission business score more than 70% across the criteria, it will be eligible for a share of a financial reward of up to £4 million.
Innovation is a core aspect of owning a transmission network, particularly during a time of significant change. We face challenges due to the growth of renewable generation in the north of Scotland, which is spread out across some of Scotland’s most challenging and remote terrain with relatively little core infrastructure. Building the required infrastructure is a demanding task requiring considerable investment, and we’ll be overseeing planned investment in the electricity grid of around £2 billion by 2021.
Our Innovation Strategy enables our teams to identify opportunities to develop and trial innovative technologies, practices and commercial arrangements that deliver real benefits to our customers.
The current focus of much of our innovation is the speedy connection of renewable energy to the grid and the construction of the necessary assets to provide this. Our stakeholders have told us that the challenge is not just to increase network capacity but to do so quickly enough to keep up with customer demand, and throughout innovation strategy we tackle these challenges head on.
Our Innovation Objectives
We believe that innovation is key to our continued success as a business. This belief permeates all parts of our business and as a result innovation comes naturally and is well supported within our sister network businesses.
Our outputs are how we develop, maintain and operate an efficient, co-ordinated and economical system of electricity transmission. Our network will continue to deliver the same high levels of service - transmitting over 99.9% of energy needed every year – while we undertake a major construction programme to bring new sources of renewable energy generation online.
To measure these ‘outputs’, the transmission network owners across Great Britain agreed with Ofgem a method for assessing the general state of repair of the network. Every piece of equipment on the network is scored according to its expected remaining service life.
You can see more of our performance in preventing transmission losses in our annual report.