Large-scale projects designed to improve the UK’s major gas and electricity grids will add another £15 to household bills within a decade, according to energy regulator Ofgem. A report filed yesterday shows that Ofgem believes around £22bn needs to be spent to improve the current energy systems across the UK, with a number of ‘critical infrastructure projects’ requiring action within the next decade are we going to see a major energy price increase.
The price of these huge investments will inevitably be footed by private consumers and commercial energy companies. A typical household in the UK already foots a dual energy bill of £1,310, and Ofgem predict we will see tariffs lift by an average of £7 in 2013, rising to £15 in 2021.
However, National Grid, which runs much of the network, criticised the proposals outlined, saying they do not give enough incentives to energy companies to do the work needed – and in reality the proposed funding is around 20% less than what it needs to carry out the work.
“While the information currently available is limited, we believe that these initial proposals will not appropriately incentivise the essential investments necessary to provide safe, reliable networks for the UK consumer and avoid delays to the achievement of the UK’s environmental targets,” said a spokesperson for the National Grid in a statement.
About £15bn of the £22bn investment being proposed by the regulator will go towards the improvement of the electricity network in England and Wales, and the gas networks across the whole of the UK.
The rest, approximately £7bn, will be spent on ensuring the low pressure gas networks, which deliver gas to home and businesses, are reliable and safe.
Energy firms had wanted to spend £21bn on revamping the electricity transmission system and to spend a further £9bn on its gas pipelines. That would have meant average bills rising by between £15 and £20.
Ofgem chairman, Lord Mogg said: “As Ofgem’s Project Discovery set out, Britain faces an unprecedented need to invest to replace ageing infrastructure, meet environmental targets and deliver secure supplies.
“This needs to be carried out at a time of global financial uncertainty, which makes attracting investment difficult but possible.”
Defending it’s projected proposals, the regulator said the work could create 7,000 jobs and secure Britain’s energy supply, and could include new sub-sea electricity cables linking England and Wales with Scotland.
The proposals would also enable the gas distribution companies to connect around 80,000 “poor fuel households” to the gas network for the first time, and pay for carbon monoxide awareness programmes. The proposals will be published for consultation on 27 July, with final proposals due by December 2012.
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