17 December 2012

Ofgem increases National Grid upgrade investment to £24.2bn

Ofgem announced it's final proposal for funding the gas and electricity network improvements today. They've increased the budget by £2.2bn from July proposal.

Ofgem had previously planned £22bn in spending to upgrade the Electricity and Gas networks in its's July proposal saying it saw little reason why it would need to revise its initial plan to cap National Grid's spending at £28.9bn rather than the £33.5bn they had asked for.

Outgoing Chief Executive of Ofgem Alistair Buchanan had criticised National Grid for not "doing their homework properly” on their plans. The plans included £1.1bn for moving electricity cables underground. Ofgem declared £100m was enough.

National Grid responded to the proposal with an open letter to Ofgem saying:

"The Initial Proposals do not appear to meet the same standard of rigour or transparency that Ofgem has demanded of us. In analysing the proposals, we find numerous errors and questionable judgements which we cover in detail in our response.”

The revised "final” proposal from Ofgem now includes improvements to their proposed arrangements to mitigate visual impact of new and existing infrastructure with £500m for existing infrastructure and £470m for new underground cables.

If National Grid are still not satisfied with the 10% increase in the proposed budget, they still have the option of referring the case to the Competition Commission.

Ofgem estimate average energy bills will now rise by an average of £12 per year over the price control period ending 2021, starting at £8.50 on next years bill, rising to £15.10 in 2021.

The big six energy companies have all announced their price increases. There's more of a level playing field on variable tariffs without having to worry whether the cheapest rate will change as soon as you sign up! Alternatively there are tariffs available fixed until Spring in 2015 if you want to lock in for as long as possible. Whatever you do, don't sit on a standard rate tariff because "they're all the same”. They're not and you can save money by comparing gas and electricity suppliers.