Ofgem publishes initial proposals

27 July 2012

OFGEM PUBLISHES INITIAL PROPOSALS FOR TRANSMISSION & GAS DISTRIBUTION PRICE CONTROLS

Ofgem has today published the Initial Proposals documents for the transmission and gas distribution price controls which will run from 2013 - 2021. The documents provide further detail to the headlines document published on 16th July.

These proposals include around £22 billion to upgrade and renew Britain's gas and high voltage electricity networks. This will ensure that Britain's networks remain among the most reliable in the world.

The majority of the proposed investment, around £15 billion, would include the upgrade and renewal of the high voltage electricity network in England and Wales and the high pressure gas networks across Britain. These networks are operated by National Grid and the package would fund major projects such as a new sub-sea electricity cable linking England/Wales and Scotland. The building of these critical infrastructure projects could create around 7,000 jobs, mainly in the construction supply chain.

An estimated £7 billion would help to ensure that our low pressure gas networks, which deliver gas to homes and businesses, remain safe and reliable. The money would fund the continued maintenance across Britain of the gas distribution network, in particular the gas mains replacement programme. In addition, our proposals would enable the gas distribution companies to connect around 80,000 fuel poor households to the gas network.

We have also published our initial proposals on incentives for National Grid to perform its roles as the operator of the electricity and gas transmission systems efficiently. These proposals, are based on the RIIO (Revenue= Incentives + Innovation + Outputs) principles for regulating monopoly energy companies and aim to encourage the right behaviours from National Grid to provide value for money for present and future consumers.

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Notes to editors

1. The transmission Initial Proposals published today are in addition to the transmission plans of Scottish Power and SHETL (SSE) which were approved in April this year.

The £22 billion investment takes into account capex and repex costs and is based on 2009-10 prices.

2. Initial Proposals

The RIIO-T1 Initial Proposals can be found at: http://www.ofgem.gov.uk/Networks/Trans/PriceControls/RIIO-T1/ConRes/Documents1/RIIO%20T1%20Initial%20Proposals%20for%20NGGT%20and%20NGET%20Overview%202707212.pdf

The RIIO-GD1 Initial Proposals can be found at: http://www.ofgem.gov.uk/Networks/GasDistr/RIIO-GD1/ConRes/Documents1/GD1%20Initial%20Proposals%20Overview%2027July12.pdf

The System Operator Incentives can be found at: http://www.ofgem.gov.uk/Markets/WhlMkts/EffSystemOps/SystOpIncent/Documents1/IP%20SO%202013.pdf

3. Next Steps

There will be an eight week consultation period and responses are required by 21 September. We intend to publish the Final Proposals in December 2012 and undertake the statutory consultation on the licence changes implementing those proposals in the new year.

4. Ofgem is the Office of the Gas and Electricity Markets, which supports the Gas and Electricity Markets Authority, the regulator of the gas and electricity industries in Great Britain. The Authority's powers and duties are largely provided for in statute, principally the Gas Act 1986, the Electricity Act 1989, the Utilities Act 2000, the Competition Act 1998, the Enterprise Act 2002, the Energy Act 2004 as well as arising from directly effective European Community legislation.

For further press information contact:

Lisa O'Brien 020 7901 7426

Felicity Beverley 020 7901 3858

Rory Edwards 020 7901 7246

Mark Wiltsher 020 7901 7006

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