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Ofgem has sliced £1.4bn from power networks’ business plans for the eight years from 2015, in addition to the £700 million savings the companies proposed themselves in their revised business plans.
The regulator has today set out its proposed price control settlements for the first round of the new RIIO regulatory regime for power networks, RIIO-ED1.
Under the proposals, the average annual consumer charge for energy distribution will be £12 lower than today’s prices.
UK Power Networks has seen the largest cut in its settlement, at £5.995 million, nearly nine per cent lower than its first round bid.
All networks have seen cuts – apart from Western Power Distribution, whose bid was given enhanced status and agreed with the regulator last November.
Ofgem chief executive Dermot Nolan said: “As energy regulator, a core part of our role is to set price controls for these monopoly network companies. This is the only part of the energy bill Ofgem directly controls and our plans today will deliver better customer service and efficient investment at a lower cost for the customer.
“Today’s announcement is all part of Ofgem’s consistent drive to get the best deal for consumers while maintaining a stable regulatory regime which attracts investment as cheaply as possible. Our approach has delivered over £80 billion of investment since 1990 which has seen reliability increase and power cuts fall by 30%. At the same time, total network costs are 17% below where they were 25 years ago and electricity distribution costs are 39% lower.
“During the course of the price control there is expected to be an increased take up of low carbon technologies including heat pumps, solar panels and small-scale renewable generation. Ofgem’s regulation focuses companies’ attention on connecting these low carbon technologies in a timely and cost effective way, using smart solutions where appropriate.”
Today’s proposals are now under consultation for the next eight weeks. Ofgem will publish the final decisions in November 2014.
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