Energy network operators reject inaccurate claims about network company profits
5 September 2017
- ENA rejects claims in deeply flawed report.
- Electricity Distribution Network costs have fallen £8.50 per year under the current price control.
- Between 2010 and 2023 companies will invest over £40 billion in vital infrastructure to ensure the UK continues to benefit from one of the most reliable networks in the world and deliver a transition to a smarter energy system for customers.
Energy Networks Association (ENA) which represents the six Distribution Network Operators (DNOs) that transport electricity to Britain’s homes and businesses rejected outright claims by the Energy and Climate Change Intelligence Unit (ECIU) today that companies are making excessive profits.
DNOs are responsible for operating and maintaining 800,000 km of electricity cables across the UK, which on average costs consumers 23p per day through energy bills. Since the start of the current price control period in 2015 (RIIO-ED1) these costs have fallen by an average £8.50 per household per year, whilst companies will invest £25 billion in the network that delivers electricity into homes and businesses now and well into the future. This investment is driving improved performance, with the UK benefitting from one of the most reliable networks in the world. Ofgem’s report on the period 2010-2015 calculated the average return of DNOs to be 12% and since 2015 the companies earn returns of around 9% on average, a sizeable part of which is reliant on companies achieving efficiency savings shared with consumers.
The report ignores the RIIO-ED1 price control period which determines how much network companies invest and the cost to customers. It uses outdated and incomplete data with no detail on how conclusions are reached other than brief reference to what is a fundamentally flawed and incorrect methodology. The report is highly misleading, claiming revenue as profits without taking into account the value of the assets themselves and the £15.3 billion invested by companies between 2010 and 2015. For instance if a company invests in an asset for £100 and gets annual revenue of £10 with costs of £5 the profit is not 50% but 5%.
Network companies are thoroughly scrutinised by Ofgem and furthermore in 2015 the Competition and Markets Authority comprehensively rejected any claim that Electricity DNOs were making excessive profits or that the regulatory framework was not delivering efficient investment for consumers. Ofgem analysis shows that between 1990 and 2006 the total cost of running the GB electricity and gas networks fell 45%. Despite significant planned investment between 2006 and 2017 costs are still 17% lower.
ENA Chief Executive David Smith said, “The UK’s energy networks have a strong track record of consistently delivering for our households, businesses and communities. They are amongst the most reliable in the world and their performance has never been better.”
“The report has ignored the current price control period which began in 2015 and determines how much companies invest in the electricity network and the cost to customers.”
“Through ENA’s Open Networks Project network companies are leading the transition to a smarter, flexible energy system which will facilitate low carbon energy, enable new technologies and lower bills for homes and businesses.”
David Smith added “This poor piece of work makes unsubstantiated claims without any means to back them up. It ignores the way companies make profits, would seek to jeopardise our vital network investment and does all this against a backdrop of network companies delivering even more efficient investment as distribution costs are set to go down.”
Notes to editors
- Energy Networks Association (ENA) represents the companies that operate and maintain the gas and electricity grid network in the UK and Ireland. Serving over 30 million customers, they are responsible for the transmission and distribution network of “wires and pipes” that keep our lights on, our homes warm and our businesses running.
- During the period covered by the report DNOs reduced the average number of customers’ interruptions by 21% and the average length of these interruptions by 36%. DNOs have accommodated a rapid increase in renewable generation, connecting over 11,400MW of DG at lower than expected cost.
- Regular satisfaction surveys conducted by Ofgem with a range of customers show consistent satisfaction of more than 80% in the services provided by network companies, putting networks above any energy supply company and amongst the very best performers in the UK Customer Satisfaction Index.
For further information please contact:
Press and Public Affairs Officer
Energy Networks Association
Direct Email: [email protected]
Press Team: [email protected]
M: +44 (0) 7792 220 974