Ofgem plans to cut customer bills by £20 a year, sparking outrage among energy giants
HOPES for a “green” economic recovery were dealt a blow today when the energy regulator ran into a huge row with the industry over plans for a £25 billion investment in renewables.
Ofgem told energy companies to slash what they pay to shareholders, cut gas and electricity bills by about £20 a year, and direct cash towards a green energy network over the next five years.
The watchdog told consumers: “Less of your money will go towards company shareholders.”
The industry says the proposals threaten rather than enhance the drive towards renewable energy.
National Grid said: "We are extremely disappointed with this draft determination which risks undermining the process established by Ofgem. This proposal leaves us concerned as to our ability to deliver resilient and reliable networks, and jeopardises the delivery of the energy transition and the green recovery."
Under the plans, energy players can return no more than 3.95% to investors, perhaps saving households £3.3 billion in five years.
National Grid shares tumbled 30p to 869p.
Ofgem fought back. It says investing in the energy network of the UK is low-risk and attractive to investors.
"Strong evidence from water regulation and Ofgem's offshore transmission regime shows that investors will accept lower returns and continue to invest robustly in the sector," Ofgem said.
Jonathan Brearley, Ofgem’s chief executive, said: “Ofgem is working to deliver a greener, fairer energy system for consumers. This is why we are striking a fair deal for consumers, cutting returns to the network companies to an unprecedented low level while making room for around £25 billion of investment needed to drive a clean, green and resilient recovery.”
Energy giant SSE said it was “disappointed and deeply concerned” by the plans, which are open for consultation until September.
SSE said it was “forced to keep all options open”, threatening an appeal to the Competition and Markets Authority.
“Ofgem’s first pass at a settlement resembles a worrying return to austerity,” Rob McDonald, managing director of SSE’s transmission business, said. “Ofgem’s draft determination is a barrier towards achieving net-zero and damaging to the green economic recovery.”
SSE shares fell 12p to 1329p.
Rupert Newland, CEO of energy tech firm Arenko, said: “Like Ofgem, we would like to see a greener energy system, however we believe that technology and innovation should support the end consumer rather than forced price cuts.”
McDonald at SSE added: “Without significant changes during the consultation period there is a real risk that the critical investment in Britain's electricity networks will be unnecessarily slowed down by an appeal process via the CMA, which is not in any stakeholders' interests".
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