Ofgem permits £12 energy bills rise for grid upgrade

Pylons The investment programme will hook up new wind and nuclear generators to the grid and run more high voltage cables underground, among other things

Related Stories

The energy regulator will permit firms running the UK's electricity and gas grids to add an average £12 to annual energy bills for the next eight years to pay for upgrades and maintenance.

Ofgem said it had cut £7bn from the total cost of work on UK transmission networks planned by energy firms.

The biggest of these firms by far - National Grid - said it was reviewing the "lengthy and wide ranging" plans.

Meanwhile a lobby group warned 300,000 more homes faced imminent fuel poverty.

Energy prices have risen 7% on average this year, according to the Fuel Poverty Advisory Group, and are set to leave more households paying more than 10% of their income on home heating unless the government takes action.

Tax change

Ofgem's announcement will enable £24bn in total investment in the energy networks up until 2021.

However, an Ofgem spokesperson told the BBC that over half of the £12 bill increase was not due to physical investment in the network, but was instead because of a change in accounting rules which would mean that energy firms could no longer claim back tax on the cost of replacing parts of the network.

The regulator's announcement represents a slight increase on the £22bn investment allowance that Ofgem initially proposed in July - adding an average £11 to bills - which was attacked by National Grid for being insufficient.

What is fuel poverty?

A domestic gas fire

A household is considered to be in fuel poverty if more than 10% of its income is spent on home heating.

"In analysing the proposals, we find numerous errors and questionable judgements which we cover in detail in our response," the company had said of the initial plans in an open letter to Ofgem.

Under Ofgem's revised proposal, the average increase in annual bills between 2013 and 2021 will equal £12, starting close to £8 at the beginning of the period, and rising to £15.10 by the end.

If National Grid chooses to challenge Ofgem's new decision, it has until March to refer the matter to the Competition Commission.

National Grid and the distribution firms do not charge households directly for the cost of maintaining the grid, but the cost is instead passed through by electricity and gas suppliers.

The total cost of transmission and distribution comprises about 21% of gas bills and 10% of electricity bills.

Underground cables

Ofgem said that the increase in allowances compared with their July proposal was because the regulator had agreed to let gas network firms charge more for the cost of replacing gas mains.

Energy Secretary Ed Davey: "The big drivers on energy bills are wholesale and network costs"

National Grid operates the UK's national electricity and gas grids, as well as four of the country's eight regional gas distribution networks.

The electricity network in Scotland is owned by two other firms - Scottish and Southern and SP Energy Networks.

Ofgem had already reached an agreement with the Scottish firms in March over their investment plans, the cost of which will contribute £3.70 of the £12 average bill increase, to be borne equally across all UK households.

The planned investment spending across the UK is split between £15.5bn on electricity transmission and distribution, and £8.7bn on gas.

The investments will, among other things, hook up new wind farms and nuclear power stations to the electricity grid to replace traditional coal-fired power stations, and enable more liquefied natural gas imported from Qatar and elsewhere to be added to the gas network as North Sea gas supplies dwindle.

Other improvements will include the running of new and some existing high voltage cables underground, particularly where they affect areas of outstanding natural beauty, and the construction of a new undersea link connecting Scotland with England and Wales.

The spending on the gas network will also finance spending by the energy firms on raising public awareness about the risk of carbon monoxide poisoning.


More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites


This entry is now closed for comments

Jump to comments pagination
  • rate this

    Comment number 117.

    Somebody has to pay, why not those using the electricity ? Does anybody actually believe they are entitled to get these things free ? Try visiting your local pub and stuffing yourself with the beer they're giving away free.

  • rate this

    Comment number 116.

    What would be the reaction if Tesco forced every customer to pay £12 towards the cost of its lorries?"

    They already do. They just don't itemise it on your bill.

  • rate this

    Comment number 115.

    Now it looks like THIS is the way to really rip the public off over energy!! Carbon trading in the heart of Germany's financial sector.
    I love Germany, but the idea that only 'we' have City issues is utter nonsense.

    Check this out


    Way to go, DB!

  • rate this

    Comment number 114.

    Whatever happened to this record profits that these companies keep making? How about use the money they've already made to improve the infrastructure instead of passing more costs on to the public.

    Simpler tariffs won't bring the bills down. They'll just take the most expensive tariff and use that instead.

  • rate this

    Comment number 113.

    50% of this is a tax increase on National Grid which is passed on to the consumer. Quite pointless - I wonder if consumers immediately saw the benefits for any tax breaks that have come their way ?

    50% due to new infrastructure for wind etc. In addition to the extra £100 or so announced last month for green investments can Ed Davey give us a clear picture of the TOTAL cost of green energy ?

  • rate this

    Comment number 112.

    If we're going to have an energy tithe, can't we at least use it to try and steal the world's number one spot in the future of renewable energy from Germany?
    Cynically I believe this £12 per year per bill payer will go straight into shareholders households and provide the nation with nothing it can draw huge benefit from at all.

  • Comment number 111.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 110.

    if a new wind turbine, on the top of a hill in the middle of nowhere, costs £100,000 to build, then a further £1,000,000 to hook up to the grid, surely it is economically unviable.
    Why then is it built?
    Or is it that some Tory peer happens to own that particular hill?

  • rate this

    Comment number 109.

    What would be the reaction if Tesco forced every customer to pay £12 towards the cost of its lorries?

  • rate this

    Comment number 108.

    @54 Noj

    I think you are being far too kind calling them 'Multi-million pound businesses. Add another couple of zeros on the end of that 'million'

    They are all robbing us stupid sheep blind. Sheeple are quick to moan but do nothing about it!

  • rate this

    Comment number 107.

    Only a few weeks ago Cameron pledged to bring our bills down, since then he has allowed the Utility crooks to make us pay for this "renewable energy" and now we are made to pay extra for upgrades to the energy grid. We are being ripped off left, right and centre, pay it out of your own profits as for Ofgem what a bunch of toothless cretins.

  • Comment number 106.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 105.

    This is an utter disgrace and a shambles.

    I can't help thinking UK consumers wouldn't be fleeced by these rises if domestic energy firms had to operate on a not-for-profit basis.

  • rate this

    Comment number 104.

    Just imagine how much worse if would be if we still had nationalised industries run by jobsworth civil servants who haven't a clue.

  • rate this

    Comment number 103.

    If we are "to pay for upgrades" (as stated) then we should own the upgrades or at least a share in them.

    Any investor anywhere else gets some form of share and a return on his investment.

    Why are we being forced to hand money to the For Profit companies for nothing when every one else gets something out of it?

    Isn't this a disguised scam?

  • rate this

    Comment number 102.

    although it hurts i expect we have to pay for our future energy needs and with dwindling resources i expect that cost will rise . what i dont expect is massive profits by companys whose product is essential and i do not expect price rigging by an illeagal cartel . in these harsh times the industry should be re-nationalised to ensure energy flow and lowest prices

  • rate this

    Comment number 101.

    My gas bill for last month was double that of the equivalent period last year, and to keep my payments on-track, the utilities company is now taking 33% more than I was paying. No doubt yet another token decrease will be announced in May, followed by a large hike in November. Welcome to rip-off Britain.

  • rate this

    Comment number 100.

    So they got their estimates of cost wrong and now they want the customers to pay a surcharge.

    Any other company, and the hit would be to the balance sheet.

  • rate this

    Comment number 99.

    Anybody want to create an eGov petition on a "NO" to this,
    and that OFGEM's is not fit for purpose to regulate.

  • rate this

    Comment number 98.

    Let's see. The power companies could raise prices which would condemn more of the elderly and those in fuel poverty to die this winter...

    Or they could lower their profits for shareholders.

    Which one will they choose. Hmm...


Page 31 of 36


More Business stories



  • A painting of the White House on fire by Tom FreemanFinders keepers

    The odd objects looted by the British from Washington in 1814

  • Chris and Regina Catrambone with their daughter Maria LuisaSOS

    The millionaires who rescue people at sea

  • Plane7 days quiz

    What unusual offence got a Frenchman thrown off a plane?

  • Children testing a bridge at a model-making summer school in Crawley, West SussexSeeding science Watch

    The retired professor who turned village children into engineers

  • Krouwa Erick, the doctor in Sipilou town at the border of Ivory Coast and Guinea - 27 August 2014Bad trip

    The Ebola journey no-one in Ivory Coast wants to take

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.