Energy watchdog Ofgem has unveiled plans for a five-year industry investment worth around £25 billion to transform UK energy networks.
Its plans – aimed at delivering better value and cleaner energy for consumers – include the potential for an additional £10bn or more to be spent, while at least £630 million would be set aside for “green innovation”.
The blueprint for energy transmission and gas distribution networks was hailed as “a step in the right direction” by comparison and switching service Uswitch.com
But energy firms said the regulator’s proposed measures were flawed.
Ofgem said the package would deliver “world-class service and reliability”, as well as an estimated £20 saving in network charges on bills per household annually from next year.
It includes £25bn up front to maintain and operate gas distribution, and gas and electricity transmission networks and support the growth of green energy, with “capacity for more if needed”.
It would nearly halve network companies’ allowed rate of return, meaning less of consumers’ money going towards firms’ profits and more towards “driving network improvements”.
Ofgem, which has also asked network companies to come forward with new ideas for investment plans, said this would save firms £3.3bn over the next five years. Ofgem is also proposing to cut more than £8bn from companies’ spending plans by setting them stretching efficiency targets and disallowing costs firms “have simply not justified as delivering value for money for consumers”.
The watchdog said: “It is now up to the companies to come back and provide more robust evidence on why this expenditure is needed.”
The watchdog chief executive Jonathan Brearley said: “We are striking a fair deal for consumers, cutting returns to the network companies to an unprecedented low level and making room for around £25bn of investment needed to drive a clean, green and resilient recovery.”