Ofgem rules to knock €5bn off energy bills

By John-Paul Ford Rojas, Business Reporter
Ofgem has announced new controls for energy network companies that it expects will save consumers a total of ?5bn.
The regulator estimates that the new framework from 2021 will knock €15-€25 per year off dual fuel gas and electricity bills.
It warned last year that it was preparing to set tougher price controls on energy distribution companies – which charge for household energy suppliers - resulting in a typical cost passed on to consumers of around €250 a year out of a total of €1,100.Campaigners have criticised Ofgem, saying it has allowed the network companies to make an excess €7.5bn in profit – paid for by households – over the current eight-year regulatory period.Ofgem said on Wednesday that the "tougher approach" under its new framework would set its lowest ever cost of equity range – the amount network companies pay their shareholders – resulting in significant savings for customers.Companies affected include National Grid, UK Power Networks and SSE (which is also one of the Big Six UK household energy suppliers).These networks are monopolies so the regulator sets controls for the maximum amount they can recover to fund operations and investments.Other proposals set out by Ofgem include changing to a default five-year price control period instead of the current eight years, and tougher requirements to put the companies' plans "under the microscope".
Jonathan Brearley, Ofgem's senior partner for networks, said: "The energy sector is rapidly changing and consumers must be confident they continue to get good value for money for the services the networks deliver."Ofgem's stable regulatory regime allows companies to attract investment from around the world on behalf of consumers in Great Britain at the lowest cost."We will capitalise on this by getting network companies to work harder to deliver better value for consumers in the next price controls."The proposals will now go for consultation and Ofgem's final view on price controls will be published by the end of 2020.Gillian Guy, chief executive of Citizens Advice - which highlighted the issue last year - said: "Today's announcement is a major step forward.
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"These proposals should prevent a repeat of the billions in excess profits energy network companies are making under the current price controls."This means better value for consumers and potentially lower bills."
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