The CEO of Ofgem has insisted that bills will not increase for consumers amid plans to invest £ 20bn in improving Britain’s regional electricity grids.
The energy regulator has set a £ 20.9 billion package to upgrade the networks, which includes £ 2.7 billion in initial funding to increase capacity.
Distribution network operators have been asked to increase the resilience and reliability of supply during extreme weather events, such as Storm Arwen. More than a million homes lost electricity last November when the storm wreaked havoc, knocking down trees and power lines.
Ofgem said the upgrade would also allow consumers to have more control to save money through periodically updated prices for peak and low demand.
Amid concerns that plans to increase energy bills, which have already skyrocketed this year, Ofgem CEO Jonathan Brearley insisted that the cost to consumers to pay for the grid would remain “roughly the same”. Households pay between £ 90 and £ 100 of their bills to maintain the network.
Annual bills in Britain have soared to £ 1,971 a year and are expected to exceed £ 2,800 a year in October, before reaching £ 3,000 in January.
Brearley said shareholders more than consumers would pay for investments aimed at reducing the UK’s dependence on fossil fuels. “We have reduced shareholder profitability, so shareholders will get less out of this system,” he told BBC Radio 4.
The regulator said it “proposed strict efficiency targets for networks along with a sharp reduction in their allowable rate of return, which means less consumer money will go to the company’s profits.”
Ofgem set out its proposals for the permitted expenditure of companies and rates of return for the next five-year price control period, starting in April 2023. Its final decision should be taken at later this year.
Power distributors control local electricity networks, which connect everything from electric vehicle chargers to heat pumps.
Because they are indeed monopolies, the regulator sets the rate of return on its investors.
The £ 20.9 billion figure is less than the £ 25.2 billion the companies had proposed to invest in their business plans, presented to Ofgem.
There are 14 electricity distribution network operators, which are managed by six companies: Electricity North West Ltd, UK Power Networks, Northern Powergrid, SP Energy Networks, Scottish and Southern Electricity Networks and Western Power Distribution, owned by National Grid.
Sign up for the Daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk
RBC Europe analyst John Musk said SSE had “gone worse” with a 22% spending cut. National Grid was 19% lower than expected.
Brearley said, “We need to come up with cheaper and more sustainable forms of energy, so that overall this country is much less dependent on the volatile gas market we see internationally in the cost of living crisis.”
WPD, the largest electricity distribution business, agreed last month to pay £ 14.9 million after its support to vulnerable customers during power outages was deemed “totally unacceptable”.
This week it emerged that National Grid plans to reduce the risk of blackouts this winter by paying consumers to use less electricity at peak times.