Northern Electric : Annual Report and Accounts for Northern Electric plc for the Year Ended 31 December 2022

Northern Electric plc

Strategic Report for the Year Ended 31 December 2022 (continued)

Submitted to Ofgem in March 2014, the Business Plan described the long-term strategy and commitments that NPg Northeast would achieve during the ED1 period in order to deliver sustainable growth with regard to those with whom NPg Northeast interacted and served. Developed after a period of consultation with stakeholders, the Business Plan focused on a number of priorities (described throughout the Strategic Report) including minimizing costs, improving flood defenses, enhancing customer service, prioritizing employee safety, supporting vulnerable customers, protecting the environment and transitioning to low carbon technologies. The directors refer to the values ​​established by the Core Principles and the commitments contained within the Business Plan when considering the consequences of the decisions they make. The 2022 financial year denotes the last full year in which NPg Northeast operated under the Business Plan.

Following the publication of RIIO-ED2 (“ED2”) Business Planning guidance by Ofgem in August 2020, the Company commenced the development of its regulatory business plan for the ED2 period (1 April 2023 to 31 March 2028) (the “ED2 Plan” ), which was submitted to Ofgem on 1 December 2021 (a copy of which can be found on the Northern Powergrid Group website). As part of the development of the ED2 Plan, the Company worked with the Customer Engagement Group (“CEG”), which was established for the purpose of providing independent scrutiny and challenge to ensure that customers’ interests are adequately reflected in the ED2 Plan. Ahead of the implementation of the ED2 Plan on 1 April 2023, the Company will participate in open hearings with Ofgem and interested stakeholders and consultations before Ofgem publishes its final determination in December 2022 (for further detail, see Regulatory Integrity).

During the transition into the ED2 Period and beyond, the strategy set out in the ED2 Plan will support NPg Northeast’s evolution from DNO to Distribution System Operator (“DSO”), in order to facilitate decarbonization and take steps to achieve a fully integrated energy system . See Environmental Sustainability for more detail.

Many of the conditions set out in the License, including the way in which the base allowed revenue will be determined will be revised as a result of the stipulations set out in the ED2 final determination. However, these will not come into effect until 1 April 2023 and will therefore not be reported on until 31 December 2023 annual report and financial statements of the Group.

The Strategic Report focuses on each Core Principle and the performance of each KPI throughout the year in order to provide a summary of the success in achieving each strategic objective, progress made against certain Business Plan commitments and performance in relation to the Annual Plan.

The delivery of the Business Plan is supported by an annual business plan (the “Annual Plan”) which is submitted to the Northern Powergrid Group’s shareholder each financial year and is designed to phase progress towards the achievement of each commitment over the duration of the ED1 period. The phasing ensures that the deliverables in both plans can be measured effectively by using a mix of financial and non-financial Key Performance Indicators (“KPI”).

The Strategic Report focuses on each Core Principle and the performance of the associated KPIs throughout the Regulatory Year in order to provide a summary of the success in achieving each strategic objective, progress made against certain Business Plan commitments and performance in relation to the Annual Plan.

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