RIIO-T2 Business Plan Annexes

Annex Publication Summary

For clarity we have collated a complete list of all documents submitted in support of our business plan to Ofgem. Due to the sensitive nature of some of this information we cannot publish all of the documents in full. The summary document provides a publication status of this vast volume of supporting information. We have fully published the large majority of information however, where we have published a redacted version or not published a document we have provided an explanation. The engineering justification tab also acts to provide a full list of our named projects collated together.

• Annex Publication Summary

Annex 1: Investment Packs

Engineering Justification papers for all of our major expenditure are available upon request. Please send your request to stakeholderengagement@spenergynetworks.co.uk

Annex 2: Sustainable Workforce Strategy

Our Sustainable workforce strategy sets out how we will ensure a workforce fit for the future. This includes delivering a modern; diverse; high quality; well-trained and resilient workforce within our baseline regulatory settlement, without any additional funding or incentives.

• View Annex 2: Sustainable Workforce Strategy

Annex 3: Strategic Investment Plans - Non Load

This annex provides a more detailed explanation of the investment planning process and asset risk movements.

• View Annex 3: Strategic Investment Plans - Non Load

Annex 4: Strategic Reinforcements

This annex provides a strategic overview of the boundary upgrade projects which are considered as part of the Network Options Assessment Process. These projects have a degree of interdependence and are coordinated with other Transmission Owners. This annex complements the engineering justification papers for individual boundary upgrade projects.

• View Annex 4: Strategic Reinforcements

Annex 5: Co-creating the plan with our Stakeholders

This annex details our programme of stakeholder engagement and research in the co-creation of our RIIO-T2 Business Plan. It details the role of the Transmission User Group throughout our RIIO-T2 planning, key planning meetings as well as their enduring role as we enter into the next price control. We also outline our approach to consumer and stakeholder research, techniques and methodologies adopted and highlight key research findings used to influence and inform our decision making.

• View Annex 5: Co-creating the plan with our Stakeholders
• View Appendix 1: Research Findings - SP Energy Networks pilot Willingness to Pay digital tool
• View Appendix 2: Research Findings - Understanding SP Transmission
• View Appendix 3: Research Findings - TO wide Willingness to Pay research
• View Appendix 4: Research Findings - SP Energy Networks specific Willingness to Pay research
• View Appendix 5: Research Findings - Business Plan acceptability research
• View Appendix 6: SP Energy Networks RIIO-T2 engagement figures
• View Appendix 7: Research Findings - Willingness to Support Cost of Equity (CoE)
• View Appendix 23: SPEN TO UG Agreed Terms of Reference
• View Appendix 24: SPEN TO User Group Chair Job Description
• View Appendix 25: SPEN TO User Group Member Job Description
• View RIIO-T2 User Group Meetings to Date

Annex 6: Innovation Strategy

This annex provides more detail on our strategic focus, ambitions and culture of innovation. It provides a detailed breakdown of the proposed expenditure and expected benefits of our innovation activities in RIIO-T2.

• View Annex 6: Innovation Strategy

Annex 7: Environmental Action Plan

This Annex provides a comprehensive review of the environmental impact of our network and identifies the actions we will take during RIIO-T2 to address the opportunities and challenges these impact areas present.

• View Annex 7: Environmental Action Plan
• View Annex 7.1: Sustainable Business Strategy
• View Annex 7.2: Transmission Annual Sustainability Statement

Our Sustainable Business Strategy has been updated since the submission of these Annexes in December 2019.

• View our 2020 Sustainable Business Strategy

Annex 8: Cost benefit Analysis Process

This annex explains how we have used Cost Benefit Analysis to determine the investment option that provides the most economical outcome for consumers.

• View Annex 8: Cost benefit Analysis Process

Annex 9: Cost of Capital NERA Report

We commissioned NERA Economic Consulting (NERA) to estimate the cost of equity and to assess the correct optimal trailing average to use in the cost of debt indexation mechanism, including an estimation of the halo effect and to set out estimates of the additional costs of borrowing, for the RIIO-2 price control period.

• Annex 9: Cost of Capital NERA Report

Annex 10: Real Price Effects NERA Report

We commissioned NERA Economic Consulting (NERA) to advise on the appropriate treatment of real input price inflation, known widely as Real Price Effects (RPEs), and ongoing productivity improvement over the RIIO-T2 control period from 2021/22 to 2025/26. RPEs capture expected changes in the input prices faced by us, relative to general inflation.

• View Annex 10: Real Price Effects NERA Report

Annex 11: Business Plan Data Tables

Annex 11 sets out proposed cost, volume and output delivery information for RIIO-T2 period in a format determined by Ofgem. It covers both qualitative and quantitative information that will be used by the regulator to better understand the submission by the licence company and facilitate a full and proper assessment of the investment (Totex) on the network requirement for the RIIO-T2 price control period.

• View Annex 11: Business Plan Data Tables Part 1
• View Annex 11: Business Plan Data Tables Part 2

Annex 12: Output Incentives

In RIIO-2, output delivery incentives (ODIs) will apply where service quality improvements beyond a level that is funded through base revenues may be in the interests of consumers. Our annex sets out our proposed ODIs based on feedback from our stakeholders, including Willingness to Pay studies. For each incentive, we have explained how this will operate, including all relevant performance targets.

• View Annex 12: Output Incentives

Annex 13: Investment Process

This annex describes the structured process we use to identify investments. It describes our internal governance processes to ensure that the work we do has the right scope and that our investments are economical, efficient and co-ordinated. This has not been published to due to commercial sensitivity.

Annex 14: Planning Scenarios Baringa Report

This is an independent report provided by Baringa Partners to detail the methodology and results of the Future Energy Scenarios that have been used to underpin our load related expenditure.

• View Annex 14: Planning Scenarios Baringa Report

Annex 15: RIIO-T2 Central and Southern Scotland Electricity Scenarios 2019

A summary of the Future Energy Scenarios which was published earlier this year and summarises the detailed analysis undertaken by Baringa.

• View Annex 15: Central and Southern Scotland Electricity Scenarios 2019

Annex 16: NERA - Risk Modelling for RIIO-T2

We have worked with NERA to develop a financeability risk model, based on Ofgem’s Price Control Financial Model. This paper sets out the methodology that underpins our approach to modelling our approach to financability risk.

• View Annex 16: NERA - Risk Modelling for RIIO-T2

Annex 17: RIIO-T2 Project Team

This Annex provides an overview of the RIIO-T2 project team and the experience of the work stream leads.

• View Annex 17: RIIO-T2 Project Team

Annex 18: Competition Plan

We have a responsibility to develop and maintain an economic, efficient and coordinated transmission network. We extensively use market driven competition to do this for the benefit of consumers. Our Competition Plan sets out our existing competitive processes called “Native Competition”. The plan also focuses on Ofgem’s proposed competition models referred to as "Early" and "Late" competition. In addition, our Competition plan also sets out which RIIO-T2 price control projects we believe meet the criteria for Ofgem’s "Early" and "Late" competition models.

• View Annex 18: Competition Plan

Annex 19: Investment Plan Additional Analysis

This annex provides a more detailed analysis of the Load and Non-Load related investment plans, and the network operations plan. This includes analysis of the costs and activity levels of the main categories of expenditure compared to RIIO-T1.

• Annex 19: Investment Plan Further Analysis

Annex 20: Uncertainty Mechanisms

A detailed justification of the various uncertainty mechanisms that are proposed in the Business Plan.

• Annex 20: Uncertainty Mechanisms

Annex 21: Strategic Investment Plan Load

A summary of the process that has been taken to create the load related expenditure plans and the interaction between various projects.

• View Annex 21: Strategic Investment Plan Load

Annex 22: Supply Chain

Supply Chain – Details of the engagement we have undertaken with our supply chain to ensure our confidence in our ability to deliver our plan and fulfil the ambitions we have set out.

• View Annex 22: Supply Chain

Annex 23: Our Assurance Framework

This Annex provides an overview of the risk assessment methodology used for our risk-based Assurance framework. Information is also provided on our external assurance providers.

• View Annex 23: Our Assurance Framework
• View Appendix A - External Assurance Providers

Annex 24: Business IT Security Strategy

This annex provides information on our forecast activities for cyber security related to business IT systems. This has not been published due to the sensitivity of the content.

Annex 25: Finance

Our Finance Annex explores in more detail our approached to financing our plan. We have performed a full review of all financial information requested in Ofgem guidance and Consumer Challenge Group correspondence, as well as any information we believe to be relevant to our business plan.

• View Annex 25: Finance

Annex 26: Financial Model

Annex 26 contains the financial data templates that Ofgem requires us to complete in order to derive our revenues, financial statements and ratios that underpin our overall financeability assessment. This is Ofgem’s Business Plan Financial Model (BPFM).

• View Annex 26: Financial Model

Annex 27: Track Record

This annex contains the documents provided in response to an information request from the RIIO2 Consumer Challenge Group in the first half of 2019. This provides detailed analysis and commentary on the TPCR4 and RIIO-T1 periods. This has not been published due to the detailed costs that they contain and the associated commercial sensitivity.

Annex 28: Strategy for Engaging Stakeholders in RIIO-T2

Our comprehensive strategy for engaging with our stakeholders during the RIIO-T2 period, including a series of annual performance commitments.

• View Annex 28: Strategy for Engaging Stakeholders in RIIO-T2

Annex 29: Estates

This annex provides further information on our organisation and operation of our Fleet, Estates and Building support operations.

• View Annex 29: Estates

Annex 30: CVP Assumptions

Details of the Consumer Value Propositions (CVPs) included in our plan including the assumptions which underpin them.

• View Annex 30: CVP Assumptions

Annex 31: Output Summary

Snapshot table as requested by Ofgem in their Business Plan Guidance.

• View Annex 31: Output Summary

Annex 32: Cyber Resilience Plan

This annex details our activities for Operational Technology cyber security, including activities to ensure compliance with the Network and Information Systems directive. This has not been published due to the sensitivity of the content.

Annex 33: Sharing Factor

Our views on an appropriate totex incentive sharing factor for our RIIO-T2 plan based on a review of the various parts of the plan.

• View Annex 33: Sharing Factor

Annex 34: Our Supplementary Business Plan

Ofgem’s working assumptions, particularly around the cost of equity, are not aligned to our views. We believe a higher rate of return is necessary based on the risks and challenges we face. This annex provides details of our analysis based on the advice of independent economic advisers and the support we have received from stakeholders. It is important that this is viewed in the context of the full plan.

• View Annex 34: Our Supplementary Business Plan

Annex 35: Consolidated Network Access Policy Proposal

All Transmission Owners are required to develop one consolidated Network Access Policy (NAP). The purpose of the NAP is to facilitate efficient performance and effective liaison between the ESO and the TOs in relation to the planning, management and operation of the transmission system for the benefit of consumers. Within our Output Incentives Annex, we have provided a milestone plan which highlights the key dates and stages involved in turning our RIIO-T2 draft Network Access Policy proposal document into a final industry approved document by the 31st December 2020, ready for implementation on 1st April 2021.

• View Annex 35: Consolidated Network Access Policy Proposal

Annex 36: Engineering and Corporate Support

Annex 36 explores in more detail our indirect support costs for both engineering and corporate services, setting out what these costs represent and how they compare to RIIO-T1 and the wider industry.

• Annex 36: Engineering and Corporate Support

Digitalisation Strategy

• Please click here to view our Digitalisation Strategy