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ESO pledges to lower energy bills by £2bn

National Grid Electricity System Operator (ESO) has pledged to lower energy bills by £2 billion over five years as part of its draft business plan for RIIO2.

The figure includes £210 million from reduced balancing costs and emissions as it upgrades its control centre to make the power grid ready for zero-carbon operation by 2025, as well as more than £1 billion in avoided network and constraint costs – £466 million from coordinating more closely with other network operators and £663 million from the introduction of competition between flexibility services and network reinforcements.

The ESO said these savings would equate to £3 off the typical annual energy bill.

The RIIO2 period begins in 2021 for all sectors except electricity distribution and will last for five years. However, the ESO will operate on a two-year business planning cycle.

The ESO plans to spend an average of £257 million annually over the first two years of the price control compared to an equivalent figure of £182 million for the current settlement period. It said the difference is mainly down to £60 million of proposed new investment each year.

Over the whole of RIIO2, the ESO expects to spend almost £1.3 billion – £447 million of capital expenditure and £845 million of operational expenditure.

These costs would add £1.80 to the typical annual energy bill.

“Our business plan is founded on a vision for the next decade and beyond, focusing on how we must evolve to meet the challenges of the changing energy landscape and maximise benefits for consumers,” said National Grid director of UK system operator Fintan Slye.

“As well as delivering new systems and market platforms, we must also transform our capability through investment in information technology, innovation and people”

He continued: “We are ready to step up and become the ambitious, consumer-focused ESO that our stakeholders want us to be. Our business plan sets out how we will enable the transformation to a zero carbon energy system and continue to ensure reliable, affordable energy for Great Britain. We will do this while delivering significant value to consumers.

“Climate change is the challenge of a generation, and the time to act is now.”

The ESO is currently funded as part of National Grid Electricity Transmission (NGET) but will be subject to a bespoke price control for RIIO2 following its legal separation from the rest of the National Grid Group in April.

Transmission networks, including NGET, this week revealed plans to spend £13.7 billion over RIIO2.