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Britain’s energy watchdog has given the green light to an initial £28bn investment to upgrade the UK’s energy infrastructure, but revealed the move would increase network charges on household bills by £108.
In its final decision on price controls for energy network firms over the next five years, ofgem has increased permitted investment spending from an initial £24 billion which was temporarily brought forward in the summer.
It said £17.8 billion would be spent on gas transmission and distribution networks over the five years to 2031 at the higher investment level, with an additional £10.3 billion used to strengthen the UK’s high-voltage electricity network.
But Ofgem said its decision to increase permitted investment spending would lead to household bills rising more than expected before saving.
The network charge on bills households will see – which makes up about a fifth of average annual energy costs – will rise from £108 to £330 by 2031 to cover the cost of additional investment, up from the £104 increase predicted in its draft decision in July.
The regulator said this would include £48 for the gas network and £60 for the electricity grid.
It comes after the latest energy price cap changes were announced, which will see energy bills rise by an unexpected 0.2% from January following the increase. Government The policy costs offset falling wholesale gas prices.
But the regulator stressed that bills would be even higher without the approved investment, while the funding would allow the UK to make savings through boosting the country’s electricity production and reducing reliance on imported gas.
It said that taking into account the savings of around £80, the net increase in bills is expected to be around £30, or £3 per month, with costs expected to fall in future years as more renewable electricity generation drives down wholesale electricity costs.
Ofgem chief executive Jonathan Brierley said: “The investment will support the transition to new forms of energy and new industrial customers to help drive economic growth and protect us from volatile gas prices.
“But this is not an investment at any cost.
“Every pound must deliver value for consumers.
“The Ofgem network will hold companies accountable for delivery on time and on budget, and we make no apologies for the efficiency challenge we are facing as the industry increases investment.”
The Department of Energy Security and Net Zero (DESNZ) said spending to improve the energy network was “essential” and highlighted that the Government is offering to help with the costs by cutting electricity bills by £150 next April.
chancellor Rachel Reeves Last week’s Budget announced it would do this by scrapping the energy company liability scheme introduced by the Tories in government.
A DESNZ spokesperson said: “After years of underinvestment, upgrading our gas and electricity networks is essential to keep the lights on and ensure energy security in our country.”
Ofgem has been reviewing plans put forward by energy network companies – electricity transmission owners, national gas and gas distribution companies – since the beginning of the year and has made cuts of more than £4.5 billion compared to the initial £33 billion plans presented.
But it increased the amount that was first proposed in July, after protests from network firms, who said more was needed for additional power transmission development and the health of the infrastructure, among other reasons.
Ofgem said the 80 new power projects the investment will help include boost the grid’s capacity through new power lines, substations and other technologies to handle the influx of electricity from new renewable sources.
scottish And Southern Electricity Networks, which is owned by SSE, said: “The investment it delivers will help reduce reliance on energy imported from overseas, address grid bottlenecks and strengthen energy security, as well as act as a major catalyst for economic growth, jobs and supply chain investment across the UK to unlock the country’s full potential.”
National Gridwhich runs most of the UK’s electricity grid, said it welcomed Ofgem’s “recognition of the need for significant investment in the electricity transmission sector” and would review whether the approved package “provides an overall framework that is both investment worthy and practical”.
Greenpeace said upgrades to the network were “vital”, but called on Ofgem to ensure they provided “real value for money”, while the End Fuel Poverty coalition said “essentially these huge sums of public money must come with proper checks and guarantees for consumers”.