In 2015, Ofgem proposed the introduction of a new system to ensure fairer competition in electricity transmission. CATOs - competitively appointed transmission owners - are businesses who have competitively tendered to engage in building, financing, owning and operating Britain's onshore transmission network (a further CATO is expected to relate mostly to offshore transmission).
Gowling WLG's Energy experts look at CATOs, what they mean for the energy sector, and the chances and challenges to be faced by businesses tendering for electricity transmission.
What are CATOs?
CATOs are, in many ways, the onshore transmission equivalent of the well-known OFTO - offshore transmission owner - regime but with one major difference: the CATO will be responsible for building the transmission assets itself instead of buying them post-commissioning.
Subject to designation by Ofgem, new, separable and high value (£100 million plus) onshore electricity transmission assets will have the opportunity to be procured as CATOs. Three very large transmission projects had initially been identified.
Ofgem proposes that CATOs will received a regulatory revenue stream for a period of 25 years, rather than the OFTO period of 20 years.
"Late" and "early" CATO builds
The first CATO builds will likely be under the 'late' model, with tendering taking place once planning consent has already been granted with around four to five years before the transmission assets are required to come online.
The CATO would take over the preliminary work already managed by the incumbent transmission owner (TO) and then complete construction and bring the asset online.
Conversely, "early" CATO builds would be put out to tender with a seven to nine-year lead in to the asset being required, and the CATO would be responsible for the entire process, from obtaining consent to procuring the construction and the asset beginning its transmission.