Ofgem to cut £200m from power network revenues
The energy regulator is making good on its threat to toughen up on electricity network operators by cutting £200m from their revenues after a review of their investments.
Ofgem has warned network companies that it plans to crack down on the regulated revenue they claim from energy bills to fund grid upgrades and new projects.
The network companies – which include UK Power Networks, SSE, Scottish Power and Western Power Distribution – spent less than planned between 2010 and 2015, giving Ofgem the grounds to cut their allowed revenues from customer bills to help ease the upward pressure on energy tariffs.
“We have already told network companies that they should prepare for tougher price controls from 2021, with lower returns,” said Jonathan Brearley, Ofgem’s networks boss.
“We also want to get a better deal for customers in the current price control period which is why we have announced a reduction in the distributed network operators allowances today,” he added.
The operators have spent less than they expected to in the plans they submitted to Ofgem before 2010 in large part due to declining demand for electricity, which has meant many upgrade projects became unnecessary.
Many households and small companies are using less energy from the main grid due to more efficient appliances and a boom in domestic solar panels. As a result it cost £74m less than planned to reinforce Britain’s networks.
In addition, around £130m-worth of investment projects were scrapped because better technologies were developed that led to cheaper ways of achieving the same outcome.
The pace of innovation in the energy sector has prompted many to suggest that Ofgem reduce its regulatory periods from eight years so that networks have a better clarity about their future operating conditions.
Network charges make up 23pc of the the average dual fuel energy bill, meaning the political pressure to keep costs low is likely to grow.
News Source: The Telegraph