Ofgem has said the British will not see their energy bills rise as a result of the regulator’s plans to inject £ 21bn in improvements to the country’s electricity grids.
The proposed £ 20.9bn package includes £ 2.7bn of initial funding to increase network capacity.
Ofgem’s aim is to help create greener and more sustainable energy grids across the UK, thus increasing grid capacity, improving customer service and increasing resilience to power outages.
Investment injection: Ofgem has said the British will not see their energy bills rise amid plans to inject 21 billion pounds into improvements to the country’s electricity networks
“Flexible financing agreements will also mean that the investment can be marked to reflect changing demands over time,” Ofgem said.
Ofgem said in its statement today: “Consumers will not see any additional cost as a result of this investment, as efficiency savings and reduced investor profitability provide the necessary cash.”
The upgrade, according to the regulator, would also allow consumers to have more control to save money through periodically updated prices for peak and off-peak demand.
Ofgem also said there would be more support and guidance for vulnerable and low-income households in the future “to ensure no one misses the benefits of a zero clean energy system.”
The regulator also revealed how much will be allowed to earn the companies in charge of the country’s energy networks.
The regulator proposes to reduce the cost of the endowment of capital for companies to 4.75%, from 6 to 6.4% for the current period, which ends next year.
Currently, the average customer pays around £ 100 a year to operate, maintain and strengthen networks.
Ofgem said: “The 2023 to 2028 plan will increase grid capacity, improve customer service and resilience to prevent power outages and pave the way for increases in cheaper, greener power generation. and own production to reduce long-term bills.
Ofgem chief Jonathan Brearley said: “Ofgem’s job is to ensure that energy grids have affordable and affordable plans that attract the investment needed for a more resilient energy grid and achieve zero net government ambition. at the lowest cost to the consumer.
“These are difficult times, and this is the way out of relying on expensive and polluting imported fossil fuels and moving to a self – produced energy system that exploits the best of modern technology to level demand and reduce costs for consumers.
“We are determined to get the best deal possible for consumers and the proposals we posted today will mean that a substantial additional investment can be made to deliver zero net without further pressure on bills.
“We are confident that the five-year vision we have outlined will help build the world-class energy infrastructure needed to connect consumers with reliable, cleaner energy at an affordable price.”
Electricity giant SSE said the plans were “tough and extensive”, while National Grid said it would “work hard” with Ofgem on the plans ahead of the final determinations scheduled for December.
Ofgem will hold consultations on the proposed plan until August 25 with a final decision to be confirmed in December.
Last week, the National Audit Office confirmed that consumers will have to pay £ 2.7 billion to cover the costs of 28 failing energy suppliers since June 2021.
The NAO said payers of energy bills “had borne the brunt” of the failures and accused Ofgem of creating a market “vulnerable to large-scale shocks”.
The government is also spending taxpayer funds to support green energy supplier Bulb, which collapsed last November.
Ofgem and the Government should create a process to consider the impact of new interventions on the retail market, according to the NAO, including the price cap. He also said Ofgem should set a set of targets for its retail market regulation and report on its performance.
Average energy bills have risen to £ 1,971 a year and are expected to exceed £ 2,800 a year in October, before reaching £ 3,000 in January 2023.
Russ Mold, AJ Bell’s chief investment officer, said: “Utility companies aren’t exactly jumping for joy at Ofgem’s new electricity distribution price control proposals, and SSE calls them” hard and stretchers “.
“Energy suppliers would say they are under pressure to invest a lot to improve infrastructure, make sure the supply network is resilient and that everything is being done to achieve zero net targets.
“On the other hand, the regulator has long been looking at how much money these companies are making and whether their profits and dividends should be that high.
“National Grid says it will work‘ hard ’with Ofgem to agree on proper price control for both parties, but you can bet behind the scenes that these discussions will be rather chaotic.
“Politically, this is a sensitive issue, with consumers under considerable financial pressure due to a sharp rise in energy bills.
“The regulator will have to pay a fine between making sure the country’s energy grid is robust and efficient, while at the same time being fair to operators who can do their job and do a bit of sidelining.” It’s the size of this cake that’s still the sticking point. ‘
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