Utility projects to push up household energy bills

 

Click to follow
The Independent Online

Major projects to improve the UK's gas and electricity networks will add an average of £15 to household bills within a decade, the regulator warned today.

Ofgem believes £22 billion has to be spent on "critical infrastructure projects" such as laying undersea cables linking Scotland with England and Wales.

The cost of this investment will mean consumers, who already face a typical dual fuel bill of £1,310, will see tariffs lift by an average of £7 in 2013, rising to £15 in 2021.

But National Grid, which runs much of the network, slammed the proposals, saying they do not go far enough to incentivise energy companies to carry out the work needed.

At the heart of the row is the matter of how much energy companies are allowed to hike their charges to consumers and businesses to help fund the work.

The UK's high voltage electricity grid, high pressure gas network and some of its low pressure gas networks are run by National Grid. The rest of the low pressure gas network and the low voltage electricity network are run by other companies.

These companies pass on fees to consumers and households via energy suppliers, which will rise under the proposals.

However, Ofgem has slashed 20% from the hikes that energy companies had suggested they needed to fund the programme.

It is understood that National Grid alone planned to spend some £31 billion on its programme but Ofgem has limited the overall industry spend to £17 billion, with a further £5 billion if it proves necessary.

A National Grid statement said: "While the information currently available is limited, we believe that these initial proposals will not appropriately incentivise the essential investments necessary to provide safe, reliable networks for the UK consumer and avoid delays to the achievement of the UK's environmental targets."

It added that the packages proposed do not adequately reflect the increased scale of investment and implicit risk associated with such major investments.

Shares in National Grid were 2% lower today as investors fretted that it would struggle to get a good return on investment.

The majority of the money - some £15 billion - would be used to upgrade and renew the high voltage electricity network in England and Wales and the high pressure gas network across the UK, creating some 7,000 jobs in the supply chain.

A further £7 billion would be spent on making sure the gas networks to homes and businesses remain safe and reliable and would connect 80,000 households to the gas network for the first time.

Ofgem chairman Lord Mogg said: "Britain faces an unprecedented need to invest to replace ageing infrastructure, meet environmental targets and deliver secure supplies.

"This needs to be carried out at a time of global financial uncertainty, which makes attracting investment difficult but possible."

PA

Comments