Ofgem proposes reducing £5bn from household energy bills

“Ofgem has proposed new rules that it says would lead to UK consumers saving £5bn on energy bills over five years.

The regulator wants to cut how much consumers contribute towards energy network investment via their bills.

Ofgem says the the proposals will lead to £15-£25 in savings per year for household consumer.

The price controls will come into force in 2021 and significantly reduce the profits energy network companies receive.

Energy giant National Grid said it would continue to work with Ofgem “to achieve the best outcomes for all stakeholders”.

“We note the wide range of options the consultation document contains and acknowledge the focus on long-term thinking for critical infrastructure, incentive outperformance opportunities for well-run companies and the continuing alignment of consumer and shareholder interests,” said a National Grid statement.

Improving the grid

Energy network companies have invested £100bn into improving the national and local grids since 1990, and power cuts have almost halved since 2001.

Ofgem says that under existing price controls it has put in place, the cost of transporting a unit of electricity around Britain has fallen by 17% since the mid 1990s.

While investing in the energy network is important, the regulator said that network companies need to start consulting with consumers about their business plans, to ensure that they are in line with what consumers want and are willing to pay for.

Ofgem also said that energy network companies needed to make use of the latest technologies to ensure that the grids continue to run reliably, as well as supporting new technologies such as electric vehicles, electricity storage, and local renewable generation.

Technological savings

However, if energy network companies made savings due to using technological innovations to make their networks more efficient, then they needed to share those savings with consumers.

“The energy sector is rapidly changing and consumers must be confident they continue to get good value for money for the services the networks deliver,” said Jonathan Brearley, Ofgem’s senior partner for networks.

“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.””

Source – BBC News (http://www.bbc.co.uk/news/business-43314035)