Major networks upgrade to add £12 on energy bills

Britain’s gas and electricity networks are set to undergo a major upgrade under new plans announced by Ofgem today – adding an extra £12 on household bills. The announcement will […]

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By Priyanka Shrestha

Britain’s gas and electricity networks are set to undergo a major upgrade under new plans announced by Ofgem today – adding an extra £12 on household bills.

The announcement will enable £24.2 billion for new and upgraded infrastructure up to 2021, more than the £22.7 billion proposed by the regulator earlier this year. The figure is, however, still short of the £29.4 billion initially requested by the industry. The investment means firms running the UK’s electricity and gas grids will be permitted to add an average of £12 to annual energy bills for the next eight years, which could rise to £15.10 in 2021.

Ofgem said the cash will help connect new sources of energy generation and ensure continued reliable transportation of gas and electricity to homes and businesses. Major projects include the building of a subsea link to connect Scotland with England and Wales.

The proposals also include investment worth £8.7 billion to ensure Britain’s low pressure gas networks are safe and reliable, including strict targets for firms to carry out carbon monoxide awareness initiatives. Funding will also be available to connect around 80,000 fuel poor homes to the gas grid and help them benefit from cheaper fuel.

The regulator has introduced a new “performance based model” RIIO to set price controls to ensure consumers pay a fair price for the investment. Ofgem Chairman Lord Mogg said: “RIIO delivers a sound regulatory environment that protects consumers by attracting the energy infrastructure investment that Britain needs at a fair price. This provides a framework of strong incentives and penalties to stimulate the innovative and efficient operations of Britain’s energy companies.”

The cost of running and maintaining Britain’s energy networks up to 2021 brings the total to £38.2 billion.