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Ofgem rejects business plans

Five of the six companies that own and operate Britain's local electricity network have been told they must do more to cut costs for consumers.

Energy regulator Ofgem has rejected their business plans for the period between April 2015 and March 2023, with Western Power Distribution, which serves customers in south Wales, the Midlands and the south west of England, the only company to have its price controls agreed early.

Western's business plans include about £7 billion of expenditure of which around £3 billion is for investment to upgrade and maintain its network. In the case of the proposals from Western Power, bills should be reduced for its customers by an average of 11.6% or around £11.30.

Around 19% of an annual electricity bill is made up of network distribution costs.

Hannah Nixon, Ofgem's senior partner for distribution said: "We understand that energy costs are a big concern for consumers and we set a high target for demonstrating value for money.

"We are pleased that nearly all companies have pledged to cut bills, but we feel that most companies can go further in cutting their costs and expect to see further improvements when they resubmit their plans in March.

There are 14 distribution networks and as they are regional monopolies customers rely on regulation by Ofgem, rather than competition, to get the service they require at a reasonable price.

The other networks are Scottish & Southern Energy, SP Energy Networks in Scotland and North Wales, Electricity North West, Northern Powergrid and UK Power Networks, which covers London, the South East and East Anglia.

Despite rejecting their business plans, Ofgem praised the companies for responding positively to its call to deliver investment efficiently, with over £2 billion in cost reductions since their initial forecasts in 2012.

It is estimated that during the price control period, total expenditure will be £27 billion across all companies, of which around £13 billion is for network investment specifically.

The companies will have to submit revised plans by mid March before a final determination by Ofgem in November 2014.

Labour energy spokesman Tom Greatrex said: " Soaring energy bills under David Cameron are one of the main reasons people are facing a cost-of-living crisis, so any action to bear down on the costs of running our energy system should be welcome.

"But the regulator must also make sure that consumers actually see the benefits of this decision in their bills. All too often in the past when costs have increased, so have people's bills, but when costs have fallen, energy companies have just pocketed the difference.

"That's why Labour will freeze energy bills for 20 months and create a tough new regulator with the power to force energy companies to cut their prices when costs fall."


From Belfast Telegraph