Energy projects will add extra £15 a year to household bills
Major projects to improve the UK’s gas and electricity networks will add an average of £15 a year to household bills within a decade, the regulator has warned.
Ofgem believes £22 billion has to be spent on “critical infrastructure projects”, such as laying undersea cables linking Scotland with England and Wales.
The cost of this investment will mean consumers, who already face a typical dual fuel bill of £1,310, will see tariffs lift by an average of £7 in 2013, rising to £15 in 2021.
But National Grid, which runs much of the network, hit out at the proposals, saying they do not go far enough to motivate energy companies to carry out the work needed.
At the heart of the row is the matter of how much energy companies are allowed to increase their charges to consumers and businesses to help fund the work.
The UK’s high-voltage electricity grid, high-pressure gas network and some of its low-pressure gas networks are run by National Grid. The rest of the low-pressure gas network and the low-voltage electricity network are run by other companies.
These companies pass on fees to consumers and households via energy suppliers, which will rise under the proposals.
However, Ofgem slashed 20 per cent from the rises that energy companies suggested they needed to fund the programme.
It is understood that National Grid alone planned to spend £31bn on its programme but Ofgem has limited the overall industry cost to £17bn, with a further £5bn if it proves necessary.
A National Grid statement said: “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 investments.
Shares in National Grid were 2 per cent lower yesterday as investors fretted that it would struggle to get a good return on investment.
The majority of the money – some £15bn – would be used to upgrade and renew the high-voltage electricity network in England and Wales and the high-pressure gas network across the UK, creating some 7,000 jobs in the supply chain.
A further £7bn would be spent on making sure the gas networks to homes and businesses remain safe and reliable and would connect 80,000 households to the gas network for the first time.
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.”
Ann Robinson, director of consumer policy at uSwitch.com, said: “The work is vital, but it will also come at a cost to consumers, which is why the government must ensure that households get value for money and that every effort is made to keep the cost of energy at an affordable level.”
Search for a job
Search for a car
Search for a house
Weather for Edinburgh
Saturday 18 May 2013
Temperature: 9 C to 13 C
Wind Speed: 18 mph
Wind direction: North east
Temperature: 9 C to 18 C
Wind Speed: 8 mph
Wind direction: North east