Energy regulator Ofgem wants to produce a “smarter, fairer and cleaner” energy system that, added to reforms proposed last month, could cut consumers’ bills by £45 a year from 2021.
Its plans for revising the energy system would help customers benefit from new technology such as electric vehicles and renewables. Ofgem also wants to ensure people pay a fair share for network services. The plans would, however, lead to lower returns for investors.
Ofgem wants to set the returns to 4% – about 50% lower than under the previous price controls. Jonathan Brearley, Ofgem executive director for systems and networks, told BBC Radio 4’s Today programme the plans were important because “our energy system is changing”.
He added: “People in the future may well want to charge their electric cars and install solar panels on their houses and communities may even want to build their own wind farms. What we need is a system that supports this at least possible cost.
“Our job is to look after the long-term interests of consumers and strike a fair deal between their shareholders and those consumers.
“For example, if we have a system where the way we could connect electric cars is more flexible – that allows us to move demand, that means we have to build fewer wires, which means a lower investment overall.
“This is a consultation and we are listening to the industry and to the consumer groups. Our job is to strike that right balance and, by the end of 2020, we will have these proposals firmed – ready for 2021.”
The proposals produced a mixed response from groups associated with the industry
National Grid expressed its frustration and said in a statement: “We are disappointed with the proposed financial package,
“In order to deliver the major capital programme required across our networks in a rapidly-changing market, we need to ensure the regulatory framework also provides for fair returns to shareholders and enables us to continue to deliver world-class networks for consumers.”
However, Citizens Advice was much happier with the plans.
Its chief executive Gillian Guy said: “Energy network companies have had it too good for too long. Ofgem’s commitment to a tougher price control should curb the excess profits networks have been allowed to make.
“This is good news for people as this should result in lower bills.”