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Upgrade 'to add £15 to energy bill'

Household energy bills will rise by an average £15 over the next decade due to investment in electricity and gas networks, the regulator has warned.

Ofgem said the £22 billion of work, which includes laying undersea cables and maintaining gas mains, will ensure Britain's power network remains among the most reliable in the world and will create some 7,000 jobs in the supply chain.

Average household bills will rise by £7 next year and by up to £15 by 2021 to pay for the investment, which is subject to consultation.

National Grid said the proposals do not allow it to put up its charges by enough to encourage the investment needed in the UK's infrastructure.

The plans, which include connecting 80,000 households to the gas network for the first time, represent a significantly smaller amount than National Grid is understood to have asked for.

It wanted to spend £21 billion on electricity transmission in the eight years from 2013 in order to connect new power plants across England and Wales and £9 billion on gas pipelines. But Ofgem has said it can spend £17 billion, with a further £5 billion if there is a need.

National Grid had suggested that bills could increase by between £15 and £20 but Ofgem has limited this under its "price control" regulation. Ofgem is understood to be driving a hard bargain with National Grid because it wants to keep prices down for consumers.

A National Grid spokesman 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.

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."

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