Ofgem reveals £21bn grid overhaul to cut down bills in ‘long term’

Ofgem has pledged a five year investment programme to reduce energy bills (Gareth Fuller/PA)

(Picture: PA Archive)

Energy regulator Ofgem today unveiled a £21 billion plan to overhaul local energy grids that it promised would bring down bills “in the long term”.

The proposals for 2023 to 2028 are aimed at increasing capacity and resilience against events such as last November’s damaging Storm Arwen and pave the way for the new “net zero” era of green generation.

Ofgem pledged that the five year investment programme could be delivered without increasing network charges on consumer bills, which have soared this year as a result of a jump in wholesale prices and are expected to hit an average of £3000 in January.

Instead Ofgem said “most consumers could see a small drop in costs related to network charges”.

Households currently pay between £90 and £100 from their bills to maintain the network.

Ofgem chief executive Jonathan Brearley said that shareholders rather than consumers would pay for the investments. He told BBC Radio 4’s Today programme: “We have reduced the shareholder return so shareholders will be getting less out of this system.”

Britain has 14 regional electricity distribution network operators run by six companies. The proposed £20.9 billion package to upgrade the grids includes £2.7 billion of upfront funding to increase overall capacity.

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.

“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.”

David Smith, chief executive of Energy Networks Association (ENA) which represents the electricity distribution network operators, said: “The final determinations will need more work to give us confidence that RIIO-ED2 will be compatible with customers’ expectations of an energy system that enables the transition to net zero. We will work with Ofgem over the coming months to meet this challenge.

“As well as supporting increasing numbers of low-carbon technology through flexibility and innovation, networks need both sufficient certainty and agility around investment to meet the scale of the challenge at the time customers and communities need them.”

Basil Scarsella, chief executive of electricity distributor UK Power Networks, said: “We welcome today’s draft determination which challenges us to ensure our network is able to accommodate the transition to a net zero economy at the lowest overall cost to customers and support those most vulnerable.”

Energy giant SSE called Ofgem’s proposals “tough and stretching”.