30th Jul 2018 08:12
LONDON (Alliance News) - UK energy regulator Ofgem on Monday said it plans to save customers "over GBP5 billion" as it brings about price controls for energy networks.
The price controls, Ofgem said, set the revenue that monopoly network owners can earn through charging consumers, and the default length for the new control will be five years from 2021 compared with the current eight years.
Ofgem said there is no change to the 3% to 5% cost of equity range, which is the amount that the companies can pay to shareholders. However, the regulator noted this is "the lowest rate" ever proposed in Great Britain, and it estimates this will save over GBP5 billion for household consumers.
In the next set of price controls, Ofgem will increase the scope for opening up high-value network upgrades to benefit competition, and as a "signal of intent" it has approved National Grid PLC to build its grid upgrade to connect the new Hinkley Point C nuclear power station.
It will set a limit on the revenue National Grid can earn from the upgrade.
National Grid, in its own statement Monday, said it is pleased Ofgem has provided further clarity of the duration of the next price control, and also said Ofgem's Hinkley Point decision does not affect its commitment to the project.
Other measures introduced by Ofgem include new independent user groups and customer engagement groups, to be set up by energy companies, to give consumers "a stronger" voice in price controls.
The first of these will meet in 2020 to scrutinise companies' spending plans.
Further, Ofgem is to retain a funding package for innovation, it said, to go towards developing a "smarter, more flexible" energy system, which includes the use of electric vehicles.
Ofgem Executive Director for Systems & Networks Jonathan Brearley said: "Today we have set out our plans which will bring in tougher price controls with lower expected returns for network companies.
"This is part of our ongoing programme to ensure consumers get reliable and secure power supplies at a fair price."
He added: "As part of this continuous drive to deliver value for consumers we are using a new benchmarking approach to cut the costs of connecting the new Hinkley Point C nuclear power station.
"This is another example of how we are evolving regulation to deliver the upgrades to our power network while ensuring the impact on bills is kept as low as possible."
National Grid shares were down 0.5% early Monday at 821.40 pence.
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