Gas bills to rise:
Gas bills are set to rise further as energy regulator Ofgem has proposed allowing an increase in tariffs after distributors overspent their investment budget. Britain's four gas distribution companies, which operate the local main pipes that deliver gas to households, have spent £843m, or 65pc, more on their networks than they agreed with the regulator. Ofgem has proposed that around 40pc of the overspend should be covered by shareholders with the rest being supported by a 2pc increase in household gas bills, or £9 a year. Bills have risen sharply in the past two years as the wholesale cost of gas soared amid fears of a shortage in Britain. Scottish & Southern Energy today made a move to alleviate the problem by teaming up with Norway's Statoil to develop more capacity at a storage facility in Yorkshire. The wholesale gas price has fallen in recent weeks as more storage and import capacity come on stream, but the benefits have yet to be passed on to customers. From October 1 supplier npower will increase its gas tariffs by 17.2pc. National Grid is the largest gas distributor in the country. Scotia Gas Networks, which is backed by Scottish & Southern, Hong Kong-backed Northern Gas Networks and Wales & West Utilities, which is owned by a consortium led by Austrilaian bank Macquarie, operate the remaining gas distribution networks. The distribution companies wanted to pass more of the additional costs on to customers. Nick Goodall, chief executive of industry body Energy Networks Association, said: "Penalising the UK's gas distribution operators for delivering the networks their customers require and reducing the returns on existing and future investment sends out entirely the wrong message to prospective investors within the industry." Ofgem also announced that it will permit investment of up to £6bn in Britain's electricity and gas distribution networks for the five years to 2012. The energy regulator already expects £5bn of investment to be made but has allowed for an extra £1bn if further renewable energy and gas import projects need to be connected to the network in line with the transmission companies' "high cost estimates". Back in June Ofgem estimated £5bn in total would be required for existing plans and possible extra investment. However, the amount Ofgem will permit is still less than the £6.7bn initially proposed by the transmission companies. Britain's transmission networks, which pump gas and electricity around the country, are run by the National Grid and subsidiaries of Scottish Power, and Scottish & Southern Energy and have an incentive to propose higher levels of investment as the regulator sets a fixed rate of return. More investment automatically means more returns. Some of the investment will be directed at transmitting electricity generated by wind power in the north of Scotland to the south of Britain where demand is greatest. Ofgem chief executive Alistair Buchanan said: "Our latest refinement of the price control proposals will ensure that the UK continues to get outstanding quality of service from the power and gas transmission companies at a time when the companies will be making heavy investment to connect vital new wind farms and other electricity plant." Overall transmission charges will rise 6pc as a result of these proposals but the impact on customers will be small, according to Ofgem, as transmission makes up only 3pc of household energy bills. 27.9.06