25th Sep 2006 07:02
OFGEM25 September 2006 R/46 Monday 25 September Transmission price control review September update Regulator Ofgem today (Monday) has published updated proposals in itsconsultation on the price controls for the four monopoly electricity and gastransmission companies in Great Britain. The update builds on initial proposalsmade in June and introduces new measures to help promote more sustainablenetwork development and safeguard consumers' interests at time of risinginvestment in networks. Ofgem's proposals will ensure the transmission companies are able to make theinvestment needed to maintain the existing high level of performance from theirnetworks. Furthermore, the latest proposals - updated following a consultationin June this year - ensure the companies can meet the investment needs emergingfrom the growth of renewable generation and the need to import more gas. "Our latest refinement of the price control proposals will ensure that the UKcontinues to get outstanding quality of service from the power and gastransmission companies at a time when the companies will be making heavyinvestment to connect vital new wind farms and other electricity generationplant. At the same time we are looking to add to our already substantial toolkit that protects customers against companies who might significantly underinvest," said Ofgem chief executive Alistair Buchanan. The capital investment planned under the updated proposals amounts to £4.5billion - an increase of some £260 million since our June proposals. Thisincreases to £5 billion once already agreed investment in electricitytransmission infrastructure for renewable generation is added. In total,transmission investment under the current proposals is double that allowed inthe previous price control. Furthermore, a new flexible adjustment mechanismwill trigger funding for new investment in the gas and electricity transmissionnetworks as customers need it. Ofgem has continued to ensure that consumers benefit from efficiency savings,and has reduced operating and investment costs significantly from the companies'original forecasts. Overall transmission charges will increase by 6% as aresult of these proposals but the impact will be small as transmission makes uponly about 3% of household energy bills. New proposals since the June Initial Proposals include: - to encourage more sustainable network development with a newincentive to target leakage of sulphur hexafluoride - a gas used in high voltageswitching apparatus which is a very potent greenhouse gas if released into theatmosphere; - to safeguard consumers in the event that companies' investments fallsubstantially below their allowances, in particular in the area of 'discretionary' spend which is not related to demand for new connections. Ofgemputs forward ideas which include a 'safety net' that will trigger an automaticreview if expenditure in this area falls more than 20% below allowance. Thisproposal works to strike a better balance between giving the companies scope forinvestment while protecting consumers from the prospect of that investment notthen being made. Ofgem's final proposals for transmission price controls will be published inDecember 2006. Notes to editors 1. Ofgem is reviewing the price controls for the four electricity and gastransmission companies which own Britain's high-voltage national networks andthe national trunk gas pipelines: • National Grid Electricity Transmission (NGET) • National Grid Gas NTS (National Transmission System) • Scottish Power Transmission Limited • Scottish Hydro-Electric Transmission Limited. 2. Following consultation on today's proposals final Ofgem will publish itsfinal proposals in November 2006. The finalised controls will then take effectfrom 1 April 2007 and run to 31 March 2112. 3. Capital expenditure The table below summarises Ofgem's current assessment of the companies' spendingrequirements: National National Grid Scottish Power Scottish TotalGrid Gas NTS Electricity Transmission Hydro-Electric Transmission Ltd Limited Transmission Limited.£797m £2953m £575m £178m £4.5 bn Already agreed investment to connect new £500mrenewable generation during the pricecontrol period Grand total £5.0 bn 4. As part of the review Ofgem is also proposing to introduce new flexiblemechanisms enabling it to adjust the companies' revenue allowances, either up ordown, in response to the needs of users of the networks. The need for thisarises from uncertainty over when some renewable power generation or gas importprojects will be completed. If these projects do go ahead then the flexibilitywill allow the transmission companies to make additional investments. If thecompanies' high case estimates of potential investment prove correct, this couldadd a further £1 billion of investment, potentially increasing the total to asmuch as £6 billion. 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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