Budget Preparation and Approval Process

This section is a summary extract of REC Section 9 and Parties are recommended to review the legal text as set out in Section 9 of the REC to ensure they make an informed decision.

Section 9 of REC v1.1 requires the RECCo Board to prepare a strategy which sets out the key activities to be delivered over the coming three years and publish that strategy, along with indicative costs, and invite comments thereon from REC Parties and interested stakeholders. The RECCo Board shall then determine its strategy and budget.

The Budget is agreed by the RECCo Board and published to REC Parties to allow them the opportunity to appeal the decision of the REC Board to approve the budget to the Authority (Ofgem) within 10 Working Days of that decision being notified to Parties. Any appeal brought must be specific to one or more individual cost items (see Table 2: Analysis of 2021_22 Budget by category) not to the budget as a whole.

The Authority may allow an appeal where the Authority is satisfied that the cost item in question:

a) was not consulted upon as part of the draft budget or in accordance with Clause 9.5 or the REC Board failed to have reasonable regard to any consultation responses submitted;

b) is not a legitimate item of expenditure for the REC Board;

c) is a manifestly inappropriate provision for the activity in question, and there are insufficient safeguards in place to ensure that the actual costs incurred will be efficient; or

d) will, or is likely to, prejudice unfairly the interests of one or more Parties, or cause them to be in breach of this Code, the Energy Licences and/or Law.

Where the Authority allows an appeal of the budget, the Authority may:

a) refer the particular cost item back to the REC Board for further consideration and, if appropriate, to pursue a revision to the prevailing budget;

b) revise the provision for that budget item to a figure which it reasonably considers to be a better forecast of the cost likely to be incurred, whether that is higher or lower than the REC Board budgeted figure; or

c) direct the REC Board to remove that cost item entirely, and make a suitable revision to its annual budget and strategy.

Pending resolution of any appeal, RECCo shall not be entitled to incur costs in respect of the cost item that is subject to appeal, except insofar as necessary to comply with legally binding obligations which it has previously incurred in accordance with this Code.

Should a REC Party wish to appeal one or more budget items then they must submit their appeal to Ofgem no later than 22 February 2021 setting out the rationale for such appeal with reference to the criteria set out in REC v1.1 Section 9.