Just as summer is heralded by warmer rain, MP's holiday's are heralded by government announcements. One such announcement is the long-awaited "RPI-X@20 Recommendations" that sets out the regulated future of the Electricty and Gas industry.
http://www.ofgem.gov.uk/Networks/rpix20/ConsultDocs/Documents1/RPI-X@Recommendations.pdf
The Industry has got until the 6th September to get its thoughts and reactions back into the melting pot. It will be interesting to see what comes back.
The future world that is described in the document is, as might be expected, full of all the current buzz words such as "low carbon"; "sustainable", and "smart" and has at its heart the RIIO equation where Revenue=Incentives+Innovation+Outputs.
However there is another equation buried deep down in the document that doesn't get any attention, the "CIUR" equation: Challenge=Invest+Uncertain+Return . In the words of the document; "greatest Challenge since the construction of the national grid and the conversion to North Sea gas."= "Invest an estimated £32bn by 2020"+"the outlook is Uncertain"+"WACC-based allowed Return".
Even Einstein would struggle to get this equation to add up, especially given the recent experience of the Water Industry.