National Grid to return excess interconnector revenues early

National Grid Ventures is to repay £200 million of excess interconnector revenues ahead of schedule to help bring down energy bills over the next two years.

The repayments will cover the IFA2 interconnector to France, the Nemo link to Belgium and the North Sea link to Norway, all of which operate under Ofgem’s Cap and Floor regime.

The revenue stabilisation mechanism sets a yearly maximum (cap) and minimum (floor) for the revenues that licensees can earn over a 25-year period. They receive top-up payments if their revenues fall below the floor and in exchange must return revenues in excess of the cap to consumers. The revenues generated by interconnectors are usually compared against the cap and floor levels over five-year periods.

However, Ofgem has accepted National Grid’s offer for the calculation to be conducted ahead of schedule for both the previous and current financial years, resulting in the early repayment of an expected £200 million of excess revenues over the next two years.

Consumers will start receiving the money through reduced network charges as soon as the beginning of the next charging period in April 2023, although National Grid said it is still working with Ofgem to explore how the early repayments can have the greatest impact.

National Grid chief executive John Pettigrew said: “While National Grid’s impact on customer bills is relatively small, we strive every day to keep our costs as low as possible. Given how challenging the current rise in overall energy costs is for people across the country, we want to play our part in helping reduce consumer bills.

“That’s why we have requested this change to our standard regulatory process and are working with Ofgem to accelerate payments over the next two years to make a difference now.”

Ofgem chief executive Jonathan Brearley said: “This early payment of £200 million ensures consumers get value for money sooner from our regulatory framework.

“Our regulatory approach for interconnectors not only protects the interests of consumers, but it also promotes new investment in affordable, modern energy infrastructure.”