Saturday 24 August 2019

Ofgem proposes ‘tough but fair’ approach to electricity network price controls

The industry regulator has published an open letter seeking views ahead of changes to the system.

The letter calls for contributions ahead of the next round of price controls for electricity distribution, which are set to be introduced in 2023 (PA)
The letter calls for contributions ahead of the next round of price controls for electricity distribution, which are set to be introduced in 2023 (PA)

By Henry Saker-Clark, PA City Reporter

Energy watchdog Ofgem has proposed a “tough but fair” approach to price controls on electricity networks as they strive to meet green energy targets.

The industry regulator has published an open letter seeking views in response to its plans to ensure electricity distribution networks reduce emissions in line with government guidelines, without passing extortionate costs onto customers.

“Ofgem will strike a tough, fair settlement with companies which enables them to go further in decarbonising the economy and ensures that costs are kept as low as possible for consumers paying for the required investment,” said Jonathan Brearley, executive director for systems and networks at Ofgem.

The letter calls for contributions ahead of the next round of price controls for electricity distribution (RIIO-ED2), which are set to be introduced in 2023.

Currently, energy distribution prices are controlled every eight years but Ofgem has proposed to reduce this to five-year periods.

Mr Brearley added: “Electricity distribution networks have a fundamental role to play in the UK’s journey to reach net zero emissions by 2050.

“All our network price controls will pave the way for an affordable, reliable and more sustainable energy system which protects consumers both today and in the future, including those who are in vulnerable situations.”

Ofgem said it will publish a formal consultation in the first half of 2020 on the proposed regulatory framework for the electricity networks.

Analysts at Jefferies said its approach “shouldn’t come as a surprise” to electricity firms as it is broadly similar to its plans for the transmission and gad distribution sectors.

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