News & insights

EPA worked on behalf of Ofgem, the energy regulator, on financial issues for regulated GB energy networks throughout the RIIO-2 price controls (GD/T2/ED2) and subsequent CMA appeals. Over the four-year contract, CEPA produced independent reports and provided drafting support to Ofgem for published reports and responses, alongside leading analysis, financial modelling, investor relations sessions and briefings to senior Ofgem management.CEPA's advice spanned several key areas of the price control review, including the following workstreams: * Cost of equity – CEPA provided advice across each cost of equity parameter and broader cross-checks on equity. We provided extensive support on the measurement of beta, including analysis of European comparators, beta decomposition analysis and further empirical analysis. * Cost of debt – We provided support on assessing the cost of debt and comparing actual company costs to potential industry benchmarks, with detailed financial modelling to calibrate suitable allowances.* System Operator finance – We worked on analysis of the financing approach for the asset-light Electricity System Operator (ESO), with a separate price control being set for the ESO following legal separation from National Grid Electricity Transmission (NGET). * Financeability and financial modelling – We provided modelling support on financial issues, including helping develop an approach to financeability and the implications of different policy choices. * Time value of money – We assessed the suitable rates to include when making adjustments for the time value of money in a regulated price control setting.* International WACC review – We reviewed the approaches taken by regulators internationally to put Ofgem’s decision in context and see trends in precedent in other jurisdictions.* Broader financial analysis – Our support included broader analysis than the cost of capital parameters, including detailed analysis on Market Asset Ratios (MAR) and on the ARP-ERP differential.* Appeals support – We supported Ofgem in relation to the CMA appeals process, following the Final Determinations, including submission of Expert Reports and roundtable sessions.