PPL Acknowledges Ofgem Actions Regarding New Regulatory Framework

Regulatory framework positive for future investment

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Mar 21, 2011, 09:13 ET

ALLENTOWN, Pa., March 21, 2011 /PRNewswire/ -- It's only the first quarter of 2011, but PPL Corporation (NYSE: PPL) is getting ready for the continued evolution in regulatory oversight in 2015 in the United Kingdom for its expanded electricity delivery operations, one that emphasizes a low-carbon sustainable energy sector and strong customer engagement.

In mid-March, Ofgem, the U.K.'s Office of Generation and Electricity Markets, announced its views regarding the new performance-based RIIO framework and how it is intended to encourage the efficient investment and innovation required for Britain's gas and electricity transmission and gas distribution networks. RIIO stands for Revenue = Incentives + Innovation + Outputs.

Key features of Ofgem's views included a focus on sustainability, environmental-focused output measures, promotion of low carbon energy networks, and financing of new investment.

PPL currently owns Western Power Distribution, which provides regulated electricity distribution services to customers in England and Wales. In addition, PPL Corporation recently announced a definitive agreement to acquire the Central Networks electric distribution business in central England, the second-largest such business in the United Kingdom, from E.ON UK plc. That transaction is expected to close in early April.

With this acquisition, PPL companies in the U.S. and U.K. will be providing regulated utility services to more than 10 million customers in England, Wales, Pennsylvania, Kentucky, Virginia and Tennessee.

RIIO replaces a 20-year-old regulatory model in the U.K. that was directly tied to inflation and rewarded efficient electricity delivery companies, while penalizing inefficient ones, through financial incentives in a forced ranking among more than a dozen competitors.

With RIIO, Ofgem said it "remains committed to ensuring that efficient companies can raise the debt and equity finance they need to invest in safe and secure future networks and that they are remunerated appropriately."

Ofgem expects these views will generally apply to electricity distribution networks from April 1, 2015, the beginning of the next price control review period for electricity distribution networks.

"We are very pleased to see Ofgem continuing its evolution of the constructive framework that will reward outperformance, incorporates a thoughtful transition process and clearly recognizes the need for companies to be financially robust and attractive to investors," said Paul Farr, PPL's chief financial officer.

Farr said PPL's existing operations in the U.K. have a longstanding record of success in each of the six key categories to be measured by RIIO: environmental responsibility, connections service, customer satisfaction, safety, social responsibility, reliability and availability.

In addition to operating best-in-class utility operations in the United States and the United Kingdom, PPL Corporation, headquartered in Allentown, Pa., owns or controls about 19,000 megawatts of generating capacity in the United States and sells energy in key U.S. markets. More information is available at www.pplweb.com.

SOURCE PPL Corporation