Electricity Distribution Price Control Review Final Proposals

7 December 2009

Electricity Distribution Price Control Review Final Proposals

Ofgem’s final proposals for the Electricity Distribution Price Control Review were published today.The review sets the revenues for the seven Distribution Network Operators (DNOs) which are responsible for distributing electricity in 14 licence areas in GB. It is the fifth such price control review since privatisation of the electricity sector.

The final proposals are the latest stage in the review process that will determine what companies can charge during the five year period from 1 April 2010 to March 2015. Their impact on customers’ bills will be about £4 per annum over the five year period.

Throughout the review process, DNOs have sought an outcome that enables them to play a full role in delivering on the huge sustainability challenges being posed by the low carbon energy targets for 2020 and beyond, whilst maintaining a safe and secure electricity distribution network for the benefit of their customers.

David Smith, Chief Executive of ENA, said “Ofgem has acknowledged that the level of investment needed to meet these challenges is very large; not only to replace old assets, which are on average more than 50 years old, but also to prepare for the expanded and smarter networks the Government wants to see developed in the future.

He continued: “However, such investment will require funding from the financial community at a time when the overall spend on electricity infrastructure alone, directly attributed to meeting the 2020 targets, could total some £30bn in the three years 2012-2015. Ofgem’s proposal to set the cost of capital for the companies at only 4% in real terms (after tax) was considerably lower than anyone had anticipated.”

The companies will now go away and undertake their own individual analysis to see whether they are prepared to accept these proposals. They will have to notify Ofgem of their decision by 6 January 2010. If any company rejects the proposals, Ofgem will then make a referral to the Competition Commission.