EDF Energy Improves Regulatory Cost Reporting

Capgemini collaborates with UK electricity distributor to improve the regulatory process considerably and put the company in a better position for the forthcoming Price Control Review.

Everyone across the business is switched on to the importance of Regulatory Reporting a real lasting legacy of this project Paul Delamare, Head of Regulation and Compliance, EDF Energy (Networks Branch)

The Situation

EDF Energy own and manage the electricity distribution network covering the south and east of England, including London. With nearly eight million connected customers, EDF Energy is the largest Electricity Distribution Network Operator (DNO) in the UK.

With electricity distribution being an effective monopoly, the regulator (Ofgem) sets revenues for five-year periods through a Distribution Price Control Review (DPCR). This is based on financial and non-financial information on performance and investment plans. To ensure uniformity across all DNOs, the regulator enforces precise rules for treatment of costs and requires detailed information reported annually.

To achieve a robust revenue settlement with Ofgem, DNOs need to:

• achieve compliance by applying rules consistently with incorrect cost classification leading to direct financial loss
• understand, and take account of regulatory contract targets when making decisions with failed targets leading to financial penalties and loss of reputation
• have a clear understanding of information submitted, and be able to explain variances, from plan or for previous years. Failure could lead to loss of reputation that would impede the DNO’s negotiating position with the regulator.

EDF Energy wanted to strengthen its position on all three fronts in order to be better positioned for the next price control review.

The Solution

EDF Energy sought close collaboration with Capgemini to help deliver a solution. The decision was based on the latter’s strong project management skills coupled with in-depth industry knowledge and strong credentials of finance and compliance strategies. In addition, Capgemini demonstrated skills to manage change across multiple stakeholders supported by effective communications, benefits tracking and design authority.

The Result

Capgemini helped EDF Energy gain greater control of its regulatory reporting, supporting the wider transformation program that it was undertaking. This was achieved by making process and system changes and building confidence in the process of compliance with regulatory reporting requirements and definitions.

One of the strongest benefits acknowledged by EDF Energy was a significantly increased level of awareness of the importance of regulatory alignment within a wider circle of senior managers. This has laid a solid foundation for EDF Energy to achieve significantly larger longer-term benefits.