Current Ofgem proposals for gas distributors are totally unacceptable.

29 May 2007

Ofgem Proposals 'Totally Unacceptable'

Ofgem's initial proposals for the forthcoming five year price control for the gas distributors fall well short of what the companies could consider to be an acceptable package of measures according to ENA's Chief Executive Nick Goodall.

"Our particular concerns relate to the proposed substantive cuts in operating expenditure, investment and the allowed return on assets. Ofgems expectation that the companies can continue to significantly out-perform the rest of the economy in cutting costs is unsustainable. Additionally, the return that they will be allowed to make on their investments in the network is only 4.2%, a rate that does not adequately reflect the risk of operating a gas distribution business and one that will make it difficult for the industry to attract the required investment given the higher rates allowed for other networks.

There is still a long way to go in this process and many important issues remain outstanding. The companies have been working closely with Ofgem and hope to reach an outcome that provides a fair balance between customers and the need for the companies to finance the long term investments necessary to maintain safe, secure and reliable gas distribution networks."

ENDS

Notes for editors:

The initial proposals were published by Ofgem this morning, 29th May. They represent the first step in the process of determining what the four companies, National Grid Gas, Northern Gas Networks, Scotia Gas Networks and Wales and West Utilities will be able to charge for the use of their gas distribution networks over the period April 2008 to March 2013. They will be followed up with more details in September and culminate with a final proposals document in December.