Yahoo Finance Energy watchdog unveils £25bn green investment and plan to cut household bills
Household energy bills will drop by £20 a year after the UK energy watchdog unveiled a £25bn green investment plan meant to improve Britain’s energy infrastructure.
Ofgem said the five-year investment programme will cover repair and maintenance costs for existing gas and electricity networks and support the growth of green energy. The regulator said it would also aim to keep costs low for consumers, by cutting the amount of money usually pocketed by utilities and their shareholders.
The proposals will involve halving the rate of return for network companies to 3.95% – its lowest rate ever – allowing income from consumer bills to help pay for improvements instead.
The watchdog said it would also cut more than £8bn from company spending plans by setting more ambitious efficiency targets and blocking costs that it said firms have not justified as delivering value for consumers. “It is now up to the companies to come back and provide more robust evidence on why this expenditure is needed,” Ofgem said.
The package is meant to save £3.3bn in company expenditure from being passed on to customers between 2021 and 2026. Energy bills are expected to drop by £20 a household in 2021, though the long-term reduction in bills could drop to £10 a year depending on how much is spent on additional green energy projects over the next five years.
Ofgem’s chief executive, Jonathan Brearley, said: “We are striking a fair deal for consumers, cutting returns to the network companies to an unprecedented low level while making room for around £25bn of investment needed to drive a clean, green and resilient recovery.
“Now more than ever, we need to make sure that every pound on consumers’ bills goes further. Less of your money will go towards company shareholders, and more into improving the network to power the economy and to fight climate change.”
About £3bn of the £25bn in upfront funding will be used to connect green electricity sources and upgrade the transmission grid, to make sure the network can cope with rising levels of renewable energy as part of the energy mix.
Ofgem said it could also make another £10bn available for emissions free energy and and infrastructure upgrades that aim to reduce carbon emissions and bring the UK closer to net zero carbon targets. That is on top of a £630m fund meant to drive research and development into “crucial” green energy projects.
“Ofgem will scrutinise every investment and only give the green light to measures that deliver decarbonisation at the lowest cost to consumers,” the regulator said.
