Ofgem orders UK’s electricity distributors to cut costs

22nd November 2013

The UK energy watchdog has called on five of the nation’s six electricity distributors to cut their costs for consumers.

Today the regulator British regulator Ofgem rejected business plans from five of the six companies that own and operate Britain’s local electricity network, as it felt the firms did not adequately demonstrate value for consumers.

The companies have to submit their business plans for the next price control period between 2015 to 2023 to Ofgem for its sign-off.

Only one group, Western Power Distribution (WPD), which serves customers in south Wales, the Midlands and the south west of England, has achieved eligibility to have its price controls agreed early.

The remaining five including Electricity North West, Northern Powergrid, UK Power Networks, SSE Power Distribution, and SP Energy Networks.

WPD’s business plans, include around £7bn of total expenditure of which around £3bn is for investment to upgrade and maintain WPD’s network. The distribution element of the electricity bill, which accounts for 19% of the average annual electricity bill, would be reduced for its customers by an average of 11.6% or around £11.30 in 2012/13 prices.

Ofgem says that all companies responded well to its price controls which have driven over £2bn in savings so far but it is challenging firms to go further and deliver greater reductions.

Hannah Nixon, senior partner for distribution at Ofgem says: “We understand that energy costs are a big concern for consumers and we set a high target for demonstrating value for money. We are pleased that nearly all companies have pledged to cut bills but we feel that most companies can go further in cutting their costs and expect to see further improvements when they resubmit their plans in March.”

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