Under new Ofgem regulations, companies that manage Britain’s electricity and gas networks, such as the National Grid, will face “significantly lower range of returns” under a new set of rules published by the energy regulator.
The UK’s energy regulator has suggested that a tougher stance on pricing can deliver more than £5 billion in savings for consumers over a five-year period, as network costs are covered by customer’s energy bills.
Ofgem is proposing in the new regulatory period a cost of equity range, which determines how much network companies can pay shareholders, of between 3-5% – the lowest rate ever put forward in the country.
Furthermore, there will be a consultation on changing the price control period to a default five-year period, from the current eight year period, which will allow for better forecasting investment in decarbonising the UK’s energy system.
Jonathan Brearley, Ofgem’s senior partner for networks, said: “Ofgem’s stable regulatory regime allows companies to attract investment from around the world on behalf of consumers in Great Britain at the lowest cost. We will capitalise on this by getting network companies to work harder to deliver better value for consumers in the next price controls.”
The regulatory changes come after Citizens Advice said network companies were making “eye watering” profits from vulnerable households.