Financial Year 2023-24 view

Load-Related 5-year view 

The Load-Related plan, that is the work to connect customers to the network and make wider network reinforcements, is forecast to deliver the outputs required to meet customer needs for £2.02bn of direct capital expenditure, £418m less than adjusted allowances of £2.44bn.  The adjusted allowance position represents an increase of £986m from Final Determinations, driven by:

• Increase to allowances of £1.2bn, resulting from the application of volume drivers for generation, demand and wider works reflecting the increased need for investment in response to changing customer needs. 
• Decrease to allowances of £311m reflecting anticipated future adjustments for bridging allowances provided for the delivery of outputs beyond the second year of RIIO-T3 and adjustments relating to pre-construction funding through the Price Control Deliverable mechanism. 

In the Load-Related portfolio, we have analysed the differences between spend and allowance in order to categorise it as either:

• Efficiency or inefficiency - includes projects with specific examples where costs increased or decreased as a direct result of our action. 
• External factors outside of our control - will include projects where changes have resulted due to changing customer or ESO requirements.
• Assumptions made within the price control settlement that have varied against the actual position - will include cost changes resulting from changes in scope that has not been subject to a change in customer or ESO requirements, or where the allowance mechanism has changed.

Based on the above methodology, the £407m difference between cost and allowances has been allocated in the following manner (where a positive number is an underspend).

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Overall FY22 Performance

The forecast expenditure for the whole of RIIO-T2 is £7.5bn against Final Determination Allowances of £5.4bn – a difference of £2.1bn. Since Final Determinations, there have been updates to allowances to reflect changes in the Load-Related plan, re-openers submitted and adjustments for investment no longer required, as well as anticipated adjustments which will be enacted at the end of the price control through the relevant mechanisms. 

To understand our underlying performance, these updates have been included, adding a further £1.9bn of allowances over the price control period. This results in a reported difference between spend and allowance of £0.1bn for the RIIO-T2 period. 
 

Load Related 5-year view

In 2023/24, direct capital expenditure on the Load-Related portfolio was £351m which is £175m less than adjusted allowances of £526m. In addition to the performance factors over the 5-year period, for 2023/24 there is an additional factor for volume-driven (uncertainty mechanism) projects which is the result of misalignment between the generic phasing of allowances compared to a project-specific view of spend across the RIIO-T2 period.  This affects some projects with shorter or longer lead times than the assumed 4-year period allowances are profiled over. Based on our plan, we estimate that lead-time-related phasing issues have contributed £104m to the apparent difference between spend and allowance in 2023/24.

Asset Health Related 5-year view

The 2023/24 asset health related plan, which is our work to replace or refurbish existing equipment on the transmission network, shows a forecast spend of direct capex £1.9bn over the RIIO-T2 period, which is £81m more than adjusted allowances of £1.8bn. The allowance adjustments reflect reductions for work not now forecast to be completed, balanced with additional allowances agreed through re-openers.

The net £81m overspend has been predominantly driven by: 

• Spend on delivery of outputs outside the RIIO-T2 submission.  These are not RIIO-T2 regulatory outputs and have no baseline allowances and therefore appear as overspend.
• LPT2 is the only ‘ring-fenced Network Asset Risk Metric (NARM)’ project and is showing a £36m increase in spend compared with allowances in RIIO-T2 due to timing changes (‘Edge Effects’) and bringing decommissioning works for the Hurst to Crayford circuits into RIIO-T2. 
• There is also a £20m overspend associated with the NARM category of assets, largely due to delays to major site-based schemes for circuit breakers (covered by the NARM framework). This is broadly balanced by an underspend in the remaining four NARM categories which have seen a reduction in spend due to delivery challenges. 

The above overspends are offset by underspends on our RIIO-T2 mechanistic PCD categories, specifically Protection & Control and Overhead Line Conductor. For the Asset Health portfolio, we have also assessed the differences between spend and allowance. Based on splitting the differences in cost and allowance by the column headings in the table below, the £81m forecast overspend vs allowances has been allocated in the following manner:

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In 2023/24, direct capex expenditure on the Asset Health Related portfolio was £326m which is £104m less than adjusted allowances of £430m.  This difference between spend and allowance is predominantly driven by the following:

• The misalignment of and incomplete allowance adjustments within year. 
• Difficulties with contractor availability which started in FY22 and have continued.
• Equipment supply delays, due to increasing lead-times in a globally constrained market.
• The evolving nature of customer projects impacting on system access for asset health interventions.
• Some planned asset health replacement activities being superseded by load-related investments and therefore removed from the asset health plan.

Non-operational Capex 5-year and 2023/24 view.

Our Non-Operational capex is spend on IT, Property and Fleet. The expectation was that total Non-Operational Capex in the RIIO-T2 period will be £74m less than total allowances of £393m (including re-opener allowances). 

IT investment for the SCADA programme (how our network control systems are being replaced) forms the majority of this reported underspend.  At the time of table population, however, a re-baselining of the SCADA programme was underway to capture an updated delivery profile; updating for these changes increases the forecast RIIO-T2 period spend to £372m which is £21m lower than the post-reopener allowances. 

Our Non-Operational capex spend on IT, Property and Fleet in 2023/24 was £74m which is £21m lower than adjusted allowances of £95m.  This reflects lower IT expenditure, which has largely been driven by re-phasing into future years. The remaining variance is made up of Property investment being lower than allowances, offset by higher vehicle purchases and EV charging investment. Network Operating Costs (NOC) are the total spend on faults, inspections, repairs and maintenance, vegetation management and legal and safety. It is forecast to be £737m, which is £81m higher than the adjusted allowance position of £656m for the RIIO-T2 period. The main drivers for this difference between spend and allowance is £46m overspend on legal and safety (predominantly flood defence work) and a £44m overspend on own-use electricity at substations. 

In 2023/24, the total spend was £147m which was £15m more than allowances; this is mainly due to an increase in own-use electricity costs at substations (£7.6m) along with an overspend of £11.4m within the 'Repairs’ category, mainly due to a single major repair. This overspend is partially offset by an underspend on Inspections.

For the visual amenity projects (also included in NOC), our forecast is to spend £313m during RIIO-T2, a £6m underspend compared to adjusted allowances of £319m.  This underspend is driven by a re-profiling of spend within the Eryri (Snowdonia) project; actual spend is not aligned with the assumed profile at the time of determination as delays were experienced in the launch shaft design which moved the Tunnel Boring Machine launch date back to April 2025. 

Network Operating and Indirect Costs 5-year and 2023/24 view.

Network Operating Costs (NOC) are the total spend on faults, inspections, repairs and maintenance, vegetation management and legal and safety. It is forecast to be £737m, which is £81m higher than the adjusted allowance position of £656m for the RIIO-T2 period. The main drivers for this difference between spend and allowance is £46m overspend on legal and safety (predominantly flood defence work) and a £44m overspend on own-use electricity at substations. 

In 2023/24, the total spend was £147m which was £15m more than allowances; this is mainly due to an increase in own-use electricity costs at substations (£7.6m) along with an overspend of £11.4m within the 'Repairs’ category, mainly due to a single major repair. This overspend is partially offset by an underspend on Inspections.

For the visual amenity projects (also included in NOC), our forecast is to spend £313m during RIIO-T2, a £6m underspend compared to adjusted allowances of £319m.  This underspend is driven by a re-profiling of spend within the Eryri (Snowdonia) project; actual spend is not aligned with the assumed profile at the time of determination as delays were experienced in the launch shaft design which moved the Tunnel Boring Machine launch date back to April 2025.