9th Jul 2020 08:53
(Alliance News) - The UK energy regulator's next price controls framework was poorly-received by both National Grid PLC and SSE PLC, with the latter labelling it a "worrying return to austerity".
Ofgem's latest plans, known in the industry as RIIO-2, proposed GBP25 billion in funding, and the potential of an extra GBP10 billion, "to transform Great Britain's energy networks". It also said the measures will pocket each household an extra GBP20 in savings from network costs.
SSE shares were 0.8% lower at 1,331.00 pence and National Grid was down 3.2% at 870.74p, one of the worst performers in the FTSE 100 in early trade in London on Thursday.
Ofgem said: "Ofgem has unveiled proposals for a five-year investment programme of around GBP25 billion to transform Britain's energy networks to deliver emissions-free green energy for GB along with world-class service and reliability.
"Given the scale of green investment likely to be needed in future, Ofgem is keeping costs as low as possible for consumers by proposing the lowest ever rate of return on capital for network companies, and pushing companies to be much more efficient in how they run themselves."
The watchdog said the latest plans would "halve network companies' allowed rate of return" meaning less consumer cash "goes towards network companies' profits, and more towards driving network improvements".
"This would save GBP3.3 billion over the next five years for gas and transmission sectors alone," Ofgem added.
"In addition Ofgem is proposing to cut over GBP8 billion from companies' spending plans by setting them stretching efficiency targets and disallowing costs that companies have simply not justified as delivering value for money for consumers. It is now up to the companies to come back and provide more robust evidence on why this expenditure is needed."
The measures, Ofgem explained, will mean each household saves GBP20 in network charges.
But the measures drew the ire of FTSE 100-listed energy firms SSE and National Grid.
National Grid said it was "extremely disappointed" by Ofgem's proposals.
The power transmission and distribution firm said: "This proposal leaves us concerned as to our ability to deliver resilient and reliable networks, and jeopardises the delivery of the energy transition and the green recovery."
SSE unit Scottish & Southern Electricity Networks Transmission said it was "deeply concerned" by the RIIO-T2 measures.
Managing Director of Transmission Rob McDonald said: "Whilst our stakeholder-endorsed and evidence-based business plan was in step with the government's low carbon investment ambition, Ofgem's first pass at a settlement resembles a worrying return to austerity. Ofgem's Draft Determination is a barrier towards achieving net zero and damaging to the green economic recovery."
By Eric Cunha; [email protected]
Copyright 2020 Alliance News Limited. All Rights Reserved.
Related Shares:
National GridSSE