Ofgem confirms £185m National Grid spending cut

Ofgem has confirmed it will reduce National Grid’s spending allowance for running the electricity grid and gas main. It follows a mid-period review of the 2013-2021 energy transmission price controls […]

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By Priyanka Shrestha

Ofgem has confirmed it will reduce National Grid’s spending allowance for running the electricity grid and gas main.

It follows a mid-period review of the 2013-2021 energy transmission price controls and the regulator’s plans to cut spending by £185 million last year.

The changes in allowances mean a £168.8 million reduction for the high pressure gas pipeline price control because the Avonmouth project National Grid planned to build are no longer needed.

Its allowances for the electricity grid price control will be cut by £38.1 million as less fault protection works are needed due to fewer generators connecting to the high voltage grid.

However, Ofgem has accepted the £21.5 million allowance for system operation as it states the power system is going through “major changes” as the UK moves to a low carbon economy and it believes National Grid, as system operator, will have a bigger role to play.

That includes providing additional supply and demand balancing services.

The changes to National Grid’s revenue will come into effect from April next year.

Ofgem also seeks to reduce the grid operator’s gas distribution allowances by a further £54 million as some work on its medium pressure gas mains will not be delivered in this price control period.

The regulator has therefore launched a consultation on making those changes.

National Grid Gas Distribution said it is “pleased” with the outcomes of the mid-period review will respond to Ofgem within the consultation period.

A spokesperson added: “We had proposed an adjustment to our output commitment by 40km, rather than wait until the end of the price control. The works cannot go ahead due to a combination of engineering and stakeholder challenges. We intend to deliver the 40km of medium pressure gas pipe replacement work in London in the next price control period.”

Ofgem recently called for electricity network operators to be more flexible when responding to requests for connections.