National Grid has agreed to pay back £200 million of revenues raised from interconnectors early in a bid to cut household bills.

The move to make early payments over the next two years was previously approved by Ofgem.

Ofgem’s cap and floor regime sets a yearly maximum (cap) and minimum (floor) level for the revenues that the interconnector licensees can earn over a 25-year period.

Usually, revenues generated by the interconnector are compared against the cap and floor levels over five-year periods.

Top-up payments are made to the interconnector licensee if revenues are lower than the floor; and similarly, the licensee pays revenues in excess of the cap to consumers.

Ofgem’s approval enables National Grid to make payments of above cap revenues significantly earlier than originally planned, which will contribute to reducing consumer energy costs over the next two years.

John Pettigrew, National Grid Chief Executive Officer, said: “While National Grid’s impact on customer bills is relatively small, we strive every day to keep our costs as low as possible. Given how challenging the current rise in overall energy costs is for people across the country, we want to play our part in helping reduce consumer bills.

“That’s why we have requested this change to our standard regulatory process and are working with Ofgem to accelerate payments over the next two years to make a difference now.”

Jonathan Brearley, Ofgem Chief Executive Officer, said: “This early payment of £200 million ensures consumers get value for money sooner from our regulatory framework.

“Our regulatory approach for interconnectors not only protects the interests of consumers, but it also promotes new investment in affordable, modern energy infrastructure.

“We’re now working at pace to ensure this money is returned to the consumer in the fastest and most impactful way.”