Energy regulator Ofgem was under fire again for allowing operators of the UK’s electricity and gas distribution networks to make excessive profits.
Citizens Advice claimed the regulator had allowed companies such as National Grid PLC (LON:NG.) to make £7,5bn in excess profits over the past eight years, a sum it called on the network operators to repay.
It came as the regulator admitted returns for the operators were too high and said it would introduce lower network prices in future as part of a clampdown on the cost of power.
Power costs have become a major political issue, though plans for a price cap for 17mln customers were left of of the Queen's Speech by PM Theresa May.
The Big Six power suppliers say one of the reasons for the current level of prices is because of the network charges they have to pay.
Jonathan Brearley, the regulator's Senior Partner, Networks, said: “Ofgem is working to ensure that customers pay no more than they need to for energy networks while still benefiting from improvements in reliability and service.
“That is why in launching the new round of price controls, we are looking at what lessons we can learn to improve further the RIIO framework for consumers.”
“Our stable regulatory regime appeals to investors. We believe current market evidence suggests that they may be willing to accept lower returns for regulated assets. Setting tougher controls will ensure that Britain’s energy networks deliver even better value for customers.”
Ofgem today published a consultation paper that will be the basis of a new price control plan to be confirmed in the second quarter of 2018.
One of a number of changes being proposed is to switch from the Retail Price Index measurement of inflation to the Consumer Price Index, which excludes housing and is usually lower, as the basis for the returns a network owner can make.
Shares in National Grid (LON:NG.), the UK’s gas transmission network owner, rose 1.2% to 933.8p.
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