Brake on 
spending to cut bills 
for power 
customers

Ofgem said five of the six electricity distribution companies will be allowed to spend £17bn on upgrading and maintaining Britain’s local electricity network over the period between April and 2023.

This represents a saving of £2.1bn on their previous business plans and will be passed on to consumers through a cut in bills over the eight years.

There are 14 different distribution networks in Britain, with their operations accounting for eight per cent of an annual dual fuel bill. Today’s proposals will now be subject to consultation before a final decision in November.

The price cut will vary according to regions and may be offset by other supply costs. It comes as the UK’s major retail energy providers come under pressure to cut their bills after Ofgem said today that a typical large supplier’s pre-tax margin for the year to June 2015 rose £5 on a month earlier to £106.

Ofgem chief executive Dermot Nolan said the regulator’s intervention will deliver better customer service and efficient investment at a lower cost.

He added: “Today’s announcement is all part of Ofgem’s consistent drive to get the best deal for consumers while maintaining a stable regulatory regime which attracts investment as cheaply as possible.”

Last November, Western Power Distribution was the only company to have its prices agreed early after Ofgem judged its business plan showed sufficient value for consumers.

Ofgem returned five out of the six companies’ plans – UK Power Networks, Northern Power Grid, SP Energy Networks, SSE Power Distribution and Electricity North West – because they failed to deliver value for consumers.

Since then, companies have identified £700m of savings and Ofgem has ruled out a further £1.4bn following further analysis.

SSE said it was disappointed with a number of elements, including Ofgem’s assumptions about the scope of further cost reductions across the industry.