Energy regulator caps electricity infrastructure investment at £6.5bn

Ofgem, the UK energy regulator, has told Britain's regional electricity networks to invest £6.5bn in the next five years to upgrade their creaking infrastructure, 17 per cent less than the companies forecast.

The move to cap investment for the 14 operators between 2010 and 2015 follows the £5.2bn invested in the five-year period up to 2010, and means a £4-a year rise in the average household's electricity bills.

The regulator said the proposals will "deliver better customer service from the regional electricity network companies, maintain high network reliability and pave the way for further carbon reductions". The plans will fund "vital upgrades" to the networks, which were largely built in the 1950s and 1960s.

Ofgem called on companies to cut costs to 10 per cent lower than forecasts, as well as the cut to investments, "to protect customers from unnecessary price rises in today's difficult economic environment".

The companies will also be given incentives to cut carbon emissions as well as network losses, which currently run at the equivalent to the electricity used in six million homes.

Ofgem has toughened its stance on customer service, saying the companies would be penalised for a poor service. Companies have also been called upon to boost their existing connections service.

Ofgem chief executive Alistair Buchanan said: "Our electricity network proposals are tough but fair and will deliver for energy consumers today and in the future. We have accepted the companies' investment plans but told them to deliver them at much lower cost."

The watchdog regulates the allowed revenues and expenditure of the regional electricity networks through price controls reviewed every five years.