National Grid today slammed regulator Ofgem’s latest demands on how much money it should be allowed to make and invest, saying they are so stringent it will not be able to invest in the network, jeopardising householders’ supply of power.
Ofgem has proposed to dramatically cut the financial returns many energy network owners would be allowed to make from next April and now they are fighting back, saying the new regime will threaten jobs and climate targets.
Today, National Grid said the proposals were “unacceptable”, mainly because of the limits to how much they are allowed to spend and the lack of flexibility allowed in their investment plans.
To meet its role of reducing carbon emissions and safeguarding supply, it said, it needs a more flexible regulatory framework “that will incentivise investment whilst protecting consumers.”
The lobbying effort against Ofgem’s new chief executive Jonathan Brearley has ratcheted up ahead of his final decision on the new pricing regime in December.
Energy companies have come under fire in recent years for making what some see as excessive profits.
National Grid said it had carried out surveys on customers which showed they would prefer investment in reliability and net zero carbon to short term reductions in bills.
However, Ofgem is keen not to be seen as going soft on suppliers as consumers face a growing squeeze on household incomes and job insecurity.
Its proposal is that companies will only be allowed to make a return on their investments of 3.95% for the five years from next April, down from 7-8% under the current five-year plan.
It has also cut £8 billion from companies’ spending plans, claiming they had not done enough to prove they were good value for money.
At the weekend, ScottishPower head of networks, Frank Mitchell, said Ofgem’s proposals could force his parent company, Spain’s Iberdrola, to invest in other countries. He told the Financial Times returns in US energy networks were “at least twice as much” as Ofgem was proposing.
Ofgem counters that it is simply bringing energy returns into line with sectors such as water.