Competition watchdog backs Ofgem on cost of equity

The Competition and Markets Authority (CMA) has provisionally found in Ofgem’s favour on cost of equity, but rejected its approach on an outperformance wedge, in the cases brought by nine gas distribution networks and gas and electricity transmission networks on the regulator’s RIIO-2 decisions.

In its provisional decision released last week, the CMA said it had “provisionally determined that GEMA’s [Ofgem’s] allowed cost of equity of 4.55% was not wrong”. However the Authority said Ofgem did not provide sufficient evidence to justify the introduction of the outperformance wedge.

The appellant companies have three weeks to respond. A final determination will be issued by 30 October 2021.