Ofgem Plans GBP6.5 Billion Investment To Cut Carbon From Regional Electricity Networks

Energy regulator Ofgem plans £6.5 billion investment proposal for 2010-2015 that would deliver new and renewed regional networks, building on £5.2 billion set in 2005-2010. Ofgem has revealed proposals that would deliver better customer service from the regional electricity network companies, maintain high network reliability and pave the way for further carbon reductions. The package would add an average of approximately £4 a year to present annual household electricity bill.
The proposals include funding for vital upgrades of the networks that were built in the 1950s and 1960s, as well as incentives on the companies to invest for a low-carbon future. Ofgem has demanded that the companies deliver their investment plans for 17% less than they forecast and that they collectively cut their operating costs to 10% below their forecasts.
The proposals, approved by Ofgem’s governing authority, include new incentives and other measures to reduce carbon emissions. Companies would have incentives to connect approximately 10GW of low-carbon generation to their networks over the next five years and improved incentives to cut network losses – currently at a level equivalent to the electricity used in about six million homes.
Ofgem is proposing a new £500m Low-Carbon Networks Fund to support large-scale trials of advanced technology including smart grids, and new commercial arrangements with customers. These advances would help the networks to accommodate growth in local generation, electric vehicle use and other developments anticipated in a low-carbon economy.
Alistair Buchanan, chief executive of Ofgem, said: “We have accepted the companies’ investment plans but told them to deliver them at much lower cost. In return for higher prices we expect even better customer service and reduced carbon emissions. We are looking in particular for better service in new connections where the companies will face penalties should they fail to meet new standards. And we have proposed ambitious new incentives and funding to deliver the networks we will need in a low-carbon economy.
“Meanwhile the companies need to adapt to the needs of a low-carbon economy. Greater use of electric vehicles, home-grown generation and other developments will demand radical change in the way networks are designed, managed and operated. Measures like Ofgem’s £500m Low-carbon Networks Fund will enable the companies to explore new technical and commercial routes to a low-carbon future.”
Ofgem regulates the allowed revenues and expenditure of the regional electricity networks through price controls that are reviewed every five years.