Ofgem consults on extra funding for network firms

Three consultations on proposals to allow additional costs for the transmission of gas and electricity have been launched. They are part of Ofgem’s price control and permits them to seek funding […]

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By Priyanka Shrestha

Three consultations on proposals to allow additional costs for the transmission of gas and electricity have been launched.

They are part of Ofgem’s price control and permits them to seek funding for costs as well as sets out the amount network operators can charge customers.

The regulator received applications from National Grid and Scotia Gas Networks (SGN) for electricity and gas distribution in May this year.

They have been sought to fund upgrades and anti-terrorist strategies that boost energy security of supply in the UK.

Ofgem is proposing to allow:

> £532.9 million of the £631.8 million costs claimed by National Grid for gas and electricity transmission upgrades and

> £101.8 million of the £126.8 million costs claimed by National Grid and SGN for upgrades to sites across five gas distribution networks.

These charges for up to 2020/21 would be passed on to suppliers, who would then add the costs on energy bills.

The annual cost on consumer bills for National Grid’s electricity transmission is around 29p and 24p for gas transmission in 2016/17.

The figures would however be reduced under Ofgem’s allowance – 24p for electricity and 20p for gas transmission.

The impact would be higher for National Grid’s gas distribution in the North West – at £2.56 – and SGN’s in Scotland at £7.07 and £3.65 in Southern England.

Under Ofgem’s proposed allowance, they would fall to £2.18, £5.32 and £2.48 respectively.

The regulator is also consulting on reducing the critical national infrastructure (CNI) costs allowed for National Grid in the previous price control period by £72.5 million.

“Ofgem’s goal is to ensure the companies deliver the upgrades required by government at the best possible value to consumers and the impact upon bills is minimised. Where project management costs are considered high in comparison to other companies, Ofgem has proposed reductions”, it said.

It is inviting comments until 1st September and plans to publish final decisions by the end of September.