25th Sep 2006 07:02
OFGEM25 September 2006 R/47 Monday 25 September 2006 INITIAL PROPOSALS FOR GAS DISTRIBUTION ONE YEAR PRICE CONTROL REVIEW The initial proposals for the gas distribution one year price control have beenpublished today (Monday) by energy regulator Ofgem. The gas distribution networks (GDNs) expect to overspend their total allowancesfor capital and non-mains replacement expenditure in the current five year pricecontrol period by approximately 65 per cent or £843 million in 2005-06. TheGDNs are seeking to pass on virtually all these costs to customers. Ofgem isproposing that shareholders fund around 40 per cent of the overspend. To enable the companies to meet rising operating costs Ofgem is proposing toallow an increase in the GDNs' transportation charges of an average of 9.7 percent. The majority of this increase is the result of cost increases outside thecontrol of GDNs which have arisen during the period since the last price controlwas set. For example, the GDNs have felt the costs of increasing gas prices,pensions costs and business rates. For domestic customers, for whom distribution charges make up around 15 per centof their total bill, this represents an increase of around 2 per cent, which isless than £9 a year. The existing controls come to an end on March 31 2007 but they are beingextended for one year until April 2008 and then reset for the following fiveyears until 2013. The proposals published today relate only to the one yearcontrol. Work on the subsequent five year control will continue throughout2007. Information on costs gathered during the one year price control review will feedinto the first and subsequent full five-year reviews to enable Ofgem to extractefficiencies from the companies and bring benefits to customers from comparativeregulation. - Ends - Notes to Editors: Timeline for the Gas Distribution Price Control Review: One year extension: • September 2006 - initial proposals • December 2006 - final proposals Main review: • November • September 2007 - 2006 - Third consultation document • March 2007 - Fourth consultation document • May 2007 - Initial proposals Updated proposals • December 2007 - Final proposals 1. Copies of the document "Gas Distribution Price Control Review One YearControl Initial Proposals" are available on the Ofgem website www.ofgem.gov.uk.Hard copies can be ordered from the Ofgem distribution centre on 020 7901 7116or by email from [email protected] 2. Annual gas distribution charges for the average customer bill are £88,representing approximately 15 per cent of a total bill. 3. Following consultation, in March 2004 Ofgem set out its intention toextend the current gas distribution price control by one year to 31 March 2008.This was to provide a more balanced workload for companies and Ofgem and toallow gas distribution and transmission issues to be considered separately. Theone year control also creates an opportunity for Ofgem to review an additionalyear's data when setting the main price control. 4. The distribution companies are currently operating under price controlsset in 2002 when the networks were all part of National Grid Transco. - 2002 Start of previous Transco distribution price controls running to 2007 - 2005 Four of eight distribution networks sold - 2006-7 Consultation on one-year price controls for separate distribution networks - 2007 One-year price controls begin with consultation on first full five-year review - 2008-13 First full gas distribution price control period. 5. Ofgem is the Office of the Gas and Electricity Markets, which supportsthe Gas and Electricity Markets Authority, the regulator of the gas andelectricity industries in Great Britain. Ofgem's aim is to bring choice andvalue to all gas and electricity customers by promoting competition andregulating monopolies. The Authority's powers are provided for under the Gas Act1986, the Electricity Act 1989 and the Utilities Act 2000. For further press information contact: Trevor Loveday 020 7901 7288 Chris Lock 020 7901 7225 Julia Collings 020 7901 7217 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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