Investing in energy

Ofgem has announced a £6.5bn investment to accelerate carbon reduction and improve customer service across the UK’s regional electricity networks.

Building on a £5.2bn investment for the 2005-10 period, the energy regulator is planning to deliver new and renewed regional networks between 2010 and 2015, which it claims will add less than £4 a year, on average, to annual domestic electricity bills.

As part of the plans, electricity network companies will be required to submit investment plans for 17 per cent less than their forecasts and cut their operating costs to 10 per cent below their forecasts to protect customers against unnecessary price rises.

The regulator said it plans to implement penalties for companies who significantly fail to improve their connections and customer service.

However, it has also introduced incentives for companies to connect up to 10GW of low-carbon generation to their networks over the next five years in order to reduce carbon emissions.

In addition, a £500m Low Carbon Networks Fund for large-scale trials of advanced technology and commercial initiatives will be introduced to help networks cope with developments such as electrical vehicles and local generation projects, as part of plans for a low-carbon economy.

Alistair Buchanan, Ofgem’s chief executive, described the electricity network proposals as ‘tough but fair’ and said that in return for higher electricity prices they would expect better customer service and reduced carbon emissions.

‘We are demonstrating that our eye is on ensuring customers’ needs are met without losing sight of the importance of value for money in difficult times,’ he said. ‘Our new customer standards package will bring a step change in electricity network services.

‘We are continuing a consistent approach to costs, quality and the environment that has brought real gains for 20 years while keeping in check the effect on the bill.

‘The companies need to adapt to the needs of a low-carbon economy. Greater use of electric vehicles, home-grown generation and other developments will demand radical change in the way networks are designed, managed and operated.

‘Measures like Ofgem’s £500m Low-carbon Networks Fund will enable the companies to explore new technical and commercial routes to a low-carbon future,’ he added.

The measures are part of the regulator’s initial proposals for its price-control review covering 2010-15. Consultations will be carried out over the autumn and final proposals are expected to be announced in the winter.