(qlmbusinessnews.com via theguardian.com – – Tue, 18th Dec 2018) London, Uk – –
The energy regulator has provided some relief from rising energy costs by announcing measures that will reduce bills by about £45 a year from 2021.
Ofgem said on Tuesday that it would halve the level of returns for the companies that run the wires and pipes that supply the UK’s electricity and gas.
Consumer groups welcomed the move, saying networks had “had it too good for too long” and urging the regulator to “hold its nerve” against the inevitable industry pushback.
National Grid shares fell by nearly 4% and the company said it was disappointed by the decision, which it believes does not reflect the “level of risk borne by transmission networks”. The company runs the national electricity grid and accounts for about 3% of a typical bill.
The body that represents power and gas grid firms, the Energy Networks Association, warned the proposals would jeopardise the investment needed for the switch to a greener and smarter energy system.
As regulated monopolies, National Grid and other network companies have price controls set by Ofgem that dictate how much they can spend and profit. The current limits have been criticised for allowing firms to earn “sky high” profits totalling £7.5bn.
The move today should save consumers a collective £6.5bn over the next period of controls, which start in 2021.
Ofgem also announced a shakeup of how access to energy grids is charged, which will see the nearly 1m households that have fitted solar panels facing higher energy bills as a result. According to Ofgem figures, the average energy bill on a default tariff – the most common bill – is £1,221.
Jonathan Brearley, the regulator’s executive director for systems and networks, said: “Our proposals for the new network price controls and charging reforms will help build a lower cost, fairer energy system which is fit for this smarter, cleaner future.”
The level that Ofgem has set the returns for network firms is at the bottom of a range it published in March.
Gillian Guy, the Citizens Advice chief executive, said: “Ofgem’s commitment to a tougher price control should curb the excess profits networks have been allowed to make. This is good news for people as this should result in lower bills.”
By Adam Vaughan
