Value-Based Decision Making for UK Network OperatorsBy Victoria Wills
Risk Monetisation and UK Network Operators
The UK’s main utility regulatory bodies, Ofwat and Ofgem, have long been considered leaders among international regulators in the water, gas and electrical distribution sectors. In recent years, regulators have begun to place more emphasis on the outcomes of network operators’ portfolio plans, and the associated impact that investments have on customers and other stakeholders.
In short, UK regulators have been demanding more transparent, quantifiable justifications for utilities’ investment plans. Ofgem in particular has recommended a standardised approach to the monetisation of risk for sustainment through the CNAIM methodology (for electrical distribution network operators) and the NOMs methodology (for gas distribution operators).
Copperleaf recently published a white paper that summarises these developments and their effect on asset investment decision making in the UK. In this paper, we highlight the benefits of the methodologies used within the UK and identify several opportunities for improvement. Our insights are driven by our work with organisations such as Anglian Water and Northern Gas Networks—who selected C55 for its ability to fulfill immediate regulatory reporting requirements and provide a foundation for outperformance and future innovation.
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