CATOs – Competitively Appointed Transmission Owners

CATOs – Competitively Appointed Transmission Owners: From ITPR to Implementation

The scale of investment required across the GB electricity transmission network is unprecedented. Delivery of Clean Power 2030, increasing electrification of transport and heat, growing demand from data centres and industrial consumers, and the continued expansion of renewable generation will require substantial reinforcement of the National Electricity Transmission System (NETS) over the coming decades.

Alongside investment delivered through the incumbent Transmission Owners (TOs), policymakers have spent more than a decade exploring whether competition can play a greater role in the delivery of certain transmission assets. The result is the Competitively Appointed Transmission Owner (CATO) regime, which is now moving from policy development towards implementation.

Whilst CATOs are often presented as a new initiative, the reality is that the concept has evolved through multiple regulatory programmes, legislative changes and industry code modifications spanning more than ten years.

Timeline – The Road to CATOs

Origins in ITPR and ECIT

The origins of CATOs can be traced back to Ofgem’s Integrated Transmission Planning and Regulation (ITPR) programme, launched in 2012.

ITPR was considerably broader than transmission competition alone. It examined how transmission infrastructure should be planned and delivered across onshore, offshore and interconnector assets as the electricity system became increasingly interconnected and complex.

One of the central questions considered through ITPR was whether elements of the successful Offshore Transmission Owner (OFTO) model could be applied to onshore transmission infrastructure.

The subsequent Extending Competition in Electricity Transmission (ECIT) programme developed the detailed framework for introducing competition into onshore transmission delivery. Much of the work focused on identifying which categories of project may be suitable for competitive delivery and how competition could be introduced without compromising system security, operability or regulatory oversight.

Historically, projects considered suitable for competition were often described as being “new, separable and high value”. These concepts formed much of the early thinking behind the regime and remain useful when considering project suitability.

However, the modern framework has evolved beyond these original criteria. Current assessment approaches focus more broadly on whether a project addresses a defined network need, represents a new transmission asset or enhancement, is sufficiently separable from the wider transmission system, and is capable of delivering consumer benefit through competitive delivery.

Blake Clough Consulting has a direct connection to this history. Members of our leadership team were involved in early ITPR work, including studies supporting Ofgem’s assessment of which categories of transmission investment may be suitable for competitive delivery. Anna Ferguson, Managing Director of Blake Clough Consulting, contributed to work undertaken during the ITPR programme and subsequent developments in transmission competition policy.

Anna also co-authored industry work examining future power system modelling requirements during the energy transition and was involved in transmission competition assessments that helped shape early thinking around project suitability and delivery models. Many of the issues being discussed today around project separability, interface risk, delivery incentives and consumer value were already being considered during those early stages of policy development.

What is a CATO?

A Competitively Appointed Transmission Owner is a licensed transmission owner appointed through a competitive tender process to design, finance, construct, own and operate a specific transmission project.

A common misconception is that CATOs are simply a procurement mechanism. In reality, the regime introduces a new category of transmission owner into the operational, technical and regulatory framework of the GB electricity system.

The current model is based on what Ofgem refers to as Early Competition, whereby competition occurs before detailed design has been completed. This differs significantly from the OFTO regime, where competition generally occurs after construction.

Under the Early Competition model, bidders are expected to undertake meaningful engineering and commercial development during the tender process. This allows competing parties to influence asset design, procurement strategy, construction methodology, programme delivery and financing structures.

Following successful tender award, a CATO will hold a transmission licence and become subject to many of the same technical, operational and regulatory obligations as incumbent TOs. This requires integration across the wider industry framework, including the Grid Code, SQSS, STC and CUSC.

What Makes a Potential CATO Project?

Whilst the detailed assessment of candidate projects is ultimately a matter for the regulatory framework and project identification process, current thinking is generally centred around four key characteristics.

Needed

The project should address a clearly identified transmission need arising from strategic network planning. This may include reinforcement required to accommodate generation growth, increasing demand, network resilience requirements or wider system development objectives.

New

The project should comprise a new transmission asset or a significant enhancement rather than simply the replacement of existing infrastructure.

Separable

The scope must be capable of being clearly defined and delivered as a distinct project with manageable interfaces to the wider transmission system. This has been a central consideration since the earliest ITPR work and remains one of the most important technical criteria.

Beneficial

There should be a reasonable expectation that competitive delivery will provide benefits to consumers, whether through cost efficiency, innovation, risk allocation or improved delivery outcomes.

These principles reflect the evolution of the regime from the original “new, separable and high value” concept towards a broader assessment of whether competition is likely to deliver value while maintaining the technical and operational integrity of the transmission system.

Progress Towards Implementation

The CATO framework has taken significant time and effort to emerge, partly due to the complexity of the regulation and the number of stakeholders involved.  Unlike offshore transmission assets, onshore projects frequently contain numerous operational, physical and ownership interfaces with existing transmission infrastructure. New substations, cable circuits, overhead lines and reactive compensation assets rarely operate as standalone systems.

The regime has required the development of licence arrangements, revenue mechanisms, project eligibility criteria, code obligations, outage coordination processes, restoration responsibilities, interface management arrangements and technical compliance frameworks.

The last three years have seen significant progress.

The Energy Act 2023 established the legislative basis for competitive tendering of eligible onshore transmission projects. Subsequent regulations have defined the criteria used to determine whether projects may be suitable for competitive delivery.

In parallel, substantial code modification activity has been required across the industry framework.

Key modifications include:

• GC0159 – Introducing Competitively Appointed Transmission Owners into the Grid Code.
• CMP403 and CMP404 – CUSC modifications supporting implementation of the Early Competition framework.
• CM086 and CM087 – STC modifications introducing CATO arrangements into transmission operational governance.
• GSR031 – SQSS modifications introducing CATOs into transmission planning standards.

These modifications are important because they recognise that CATOs must be fully integrated into existing planning, operational and governance arrangements.

For example, GC0159 introduced changes relating to planning code requirements, restoration planning obligations, governance arrangements, transmission interfaces and technical standards required for CATOs to operate as licensed transmission owners.

Similarly, GSR031 introduced CATOs into the SQSS framework, ensuring transmission planning standards can accommodate competitively delivered assets whilst maintaining consistency with existing transmission planning obligations.

Alongside the code changes, Ofgem has developed the commercial framework governing CATOs, including the Tender Revenue Stream (TRS), security arrangements, cost assessment mechanisms, additional works provisions and performance incentives.

Technical Considerations for Future CATO Projects

From an engineering perspective, CATO projects present several challenges that will be familiar to transmission planners, system operators and network owners.

Project boundaries will be critical. Defining which assets sit within a CATO licence and which remain under incumbent TO ownership has implications for design responsibility, outage planning, commissioning and ongoing asset management.

Interface management is likely to be equally important. Many future projects will require modifications to existing substations, protection systems, telecommunications infrastructure and operational arrangements owned by incumbent TOs.

Power system studies will play a key role throughout project development and delivery. Depending on project scope, bidders may be required to undertake load flow analysis, fault level studies, dynamic performance assessments, harmonic studies and Grid Code compliance assessments to support both tender development and eventual commissioning.

There are also important considerations around restoration planning, outage coordination, system operability and interactions with NESO. These issues formed a significant part of the code modification process because they are fundamental to ensuring that competitively delivered assets can operate seamlessly within the wider transmission system.

How Blake Clough Can Support CATO Projects

The multidisciplinary nature of CATO projects aligns closely with Blake Clough’s core service offering.

Our electricity regulation team supports clients in navigating licence obligations, industry codes, regulatory frameworks and policy developments. This is particularly relevant in a regime where commercial arrangements are closely linked to regulatory compliance.

Our power systems specialists undertake the technical studies required to support transmission development, including load flow, fault level, dynamic performance, harmonic and Grid Code compliance studies.

Our grid consulting team supports network planning, connection strategy, technical due diligence and system integration activities across transmission and distribution networks.

Our electrical design capability spans HV and EHV infrastructure, including primary plant design, protection and control systems, earthing design and owner’s engineer services.

Importantly, Blake Clough combines these capabilities with experience that stretches back to the original ITPR programme and the early development of competitive transmission policy. This provides a practical understanding not only of how the regime operates today, but also of the policy objectives and engineering considerations that have shaped its development.

CATOs Conclusion

CATOs represent one of the most significant developments in transmission regulation since the introduction of the OFTO regime.

The concept has evolved over more than a decade, progressing from ITPR and ECIT through to the Energy Act 2023 and the recent package of Grid Code, CUSC, STC and SQSS modifications required to implement the framework.

The first projects will provide an important test of whether competition can deliver the anticipated benefits whilst maintaining the technical, operational and regulatory standards expected of the GB transmission system.

For organisations involved in transmission infrastructure, now is an appropriate time to understand the emerging framework, the associated engineering challenges and the opportunities likely to arise as the first projects progress towards market.