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Ofgem requires network operators to deliver more for less

Ofgem has sent back long-term price control plans from five of the six companies that own and operate Britain’s local electricity network, as they did not, according to the regulator, sufficiently demonstrate value for consumers. Only Western Power Distribution’s (WPD) business plans clearly demonstrated that they are good value for consumers and therefore are eligible to be fast-tracked by Ofgem.

Scottish and Southern Energy, SP Energy Networks, Electricity North West, Northern Powergrid, and UK Power networks had their initial plans returned and will be required to submit revised plans by mid-March. 

WPD, which serves customers in south Wales, the Midlands and the south west of England, is the only company that has achieved eligibility to have its price controls agreed early. The company’s business plans, which cover the period from April 2015 to March 2023, include around £7bn of total expenditure of which around £3bn is for investment to upgrade and maintain WPD’s network. The distribution element of the electricity bill, which accounts for 19% of the average annual electricity bill, would be reduced for its customers by an average of 11.6%, or around £11.30, in 2012/13 prices.

Companies responded positively to Ofgem’s call to deliver investment efficiently, driven in part by the potential to be fast-tracked, with over £2bn in cost reductions since their initial forecasts in 2012. It is estimated that, during the price control, total expenditure will be £27bn across all companies, of which around £13bn is for network investment specifically.

All of the companies submitted a high standard of business plan and in some areas companies showed real innovation and willingness to push boundaries, says Ofgem. For example, several companies set out comprehensive strategies on taking a more active role in helping consumers in vulnerable situations, working with other agencies such as the British Red Cross and National Energy Action

Since privatisation, Ofgem’s price controls have delivered a 25% improvement in network reliability and seen the electricity distribution network grow by 10%, says the regulator. 

News Item details

Journal title: Energy World

Subjects: Policy and Governance, Retail and marketing, Electricity

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