The Utility Regulator today publishes its conclusions on ‘Gas Network Extensions In Northern Ireland’ approach to comparing high pressure gas licence applications.
The consultation paper was published on 6 February 2014 in parallel with the commencement of the Gas to the West licence application period.
The consultation considered the possible methodologies for calculating the ‘risk adjustment factor’ that would be applied to the weighted average cost of capital revealed by applicants for the high pressure licence. This will ensure that those making an application on either a cost pass through or revenue cap treatment of controllable operating expenditure are treated on an equitable basis. The consultation proposed a range of possible values for the risk adjustment factor with a central case of 0.22%.
Two responses were received one from BGE (NI) and the other from Mutual Energy, both of which are published alongside the conclusions paper. The former proposed that the appropriate figure should be 0.45% while the later proposed a figure of 0.11%.
Having carefully considered the arguments made and the evidence presented by both respondents the Utility Regulator was not persuaded of the case to alter its initial analysis. The Utility Regulator has therefore determined that the correct value for the ‘risk adjustment factor’ is 0.22%.