Ofgem plans to pump £21bn into electricity network upgrades but regulator says consumers will NOT see their energy bills rise further
- Ofgem has set out a £20.9bn package to upgrade the grids across Britain
- Boss of Ofgem says consumer energy bills will not rise as a result of plans
- Updated prices for peak and off-peak energy usage on the cards
- Annual energy bills could top the £3,000 mark in January 2023
Ofgem has said Britons will not see their energy bills rise as a result of the regulator’s plans to pump £21billion into upgrades for the nation’s electricity networks.
The proposed package of £20.9billion includes £2.7billion worth of upfront funding to boost grid capacity.
Ofgem’s aim is to help create greener and more sustainable energy grids across Britain, thereby boosting grid capacity, improving customer service and building resilience against power outages.
Investment injection: Ofgem has said Britons will not see their energy bills rise amid plans to pump £21bn into upgrades for the nation’s electricity networks
‘Flexible funding arrangements will also mean that investment can dial up to reflect changing demands over time’, Ofgem said.
Ofgem said in its statement today: ‘Consumers will not see any additional costs as result of this investment as efficiency savings and reduced investor returns deliver the cash needed.’
The upgrade, according to the regulator, would also enable consumers to be given more control to save money through regularly updated prices for peak and off-peak demand.
Ofgem also said more support and guidance for vulnerable and low-income households would be available in future ‘to ensure no one misses out on the benefits of a net zero energy system’.
The regulator also revealed how much the companies in charge of the nation’s energy networks will be allowed to earn.
The regulator is proposing to reduce the cost of equity allowance for the companies to 4.75 per cent, down from 6 to 6.4 per cent for the current period, which ends next year.
The average customer currently pays around £100 a year to operate, maintain and reinforce grids.
Ofgem said: ‘The 2023 to 2028 plan will boost grid capacity, improve customer service and resilience to prevent power outages, and prepare the way for increases in the generation of cheaper, greener, home-grown energy to bring down bills in the long-term.’
Ofgem boss Jonathan Brearley said: ‘Ofgem’s job is to ensure energy networks have achievable and affordable plans that will attract the investment needed for a more resilient energy network and achieve the government’s net zero ambition at the least cost to the consumer.
‘These are challenging times, and this is the path out of relying on expensive and polluting imported fossil fuels and moving to a home-grown energy system, that exploits the best of modern technology to level out demand and reduce costs for consumers.
‘We’re determined to get the best possible deal for consumers and the proposals we’ve published today will mean that substantial additional investment can be made to deliver net zero without placing any further pressure on bills.
‘We’re confident that the five-year vision we’ve outlined will help build the world class energy infrastructure needed to connect consumers to reliable, cleaner energy at an affordable price.’
Ofgem will hold consultations on the proposed plan until 25 August with a final decision to be confirmed in December.
Last week the National Audit Office confirmed consumers will need to pay £2.7billion to cover the costs of 28 energy suppliers failing since June 2021.
The NAO said energy bill payers had ‘borne the brunt’ of the failures and accused Ofgem of creating a market ‘vulnerable to large-scale shocks’.
The government is also spending taxpayer funds to support green energy supplier Bulb, which collapsed last November.
Ofgem and the Government should create a process for considering the impact of new interventions in the retail market, according to the NAO, including the price cap. It also said Ofgem should establish a set of objectives for its regulation of the retail market and report on its performance.
Average energy bills have surged to £1,971 a year and are expected to top £2,800 a year in October, before hitting £3,000 in January 2023.