New proposals from energy regulator could save consumers £45 a year but it will apply from 2021

New proposals to slash network costs by energy regulator will save households £45 a year – but it won’t kick in until 2021

  • Ofgem will place limits on how much energy giants can pay shareholders
  • Will also slash borrowing costs for networks with savings being passed on
  • Regulator says it will help build infrastructure for ‘cleaner future’ 

By Angelique Ruzicka For Thisismoney.co.uk

Published: 08:06 EST, 18 December 2018 | Updated: 08:06 EST, 18 December 2018

Households are set to benefit from a £45 a year saving on their energy bill thanks to proposals from regulator Ofgem – but it won’t kick in until 2021.

It says it will cut prices by placing limits on how much energy giants can pay their shareholders and slashing borrowing costs for networks, which will be passed onto households. 

It estimates the move will save consumers £6.5billion in total – the equivalent of £45 a year for each household.  

The reduced cost of borrowing for energy companies is likely to save consumers £6.5bn and, in total, the reforms Ofgem wants to implement could save consumers £45 a year

Jonathan Brearley, executive director for systems and networks, said: ‘Our proposals for the new network price controls and charging reforms will help build a lower-cost, fairer energy system which is fit for this smarter, cleaner future.’

But National Grid is opposed to the regulators proposals. 

It said Ofgem’s cost of equity range does not reflect the risk borne by the operations of transmission networks, adding that the new framework needs to ensure fair returns to shareholders as well as consumers.

The National Grid said: ‘In order to deliver the major capital programme required across our networks in a rapidly changing energy market, we need to ensure the regulatory framework also provides for fair returns to shareholders and enables us to continue to deliver world-class networks for consumers.’

Ofgem has proposed baseline cost of equity returns at four per cent, down 50 per cent from previous price controls. 

Alongside the network price controls, Ofgem will also press ahead with further network charging reforms to ‘squeeze more capacity out of the electricity grids’ to cut the cost to consumers of moving to a smarter energy system.

Acknowledging that millions of electric vehicles will be on the roads in coming decades, Ofgem says its proposals includes incentives for drivers to charge electric vehicles outside peak times, to allow more electric vehicles to be charged from the existing grid.

Brearley adds: ‘We want to cut the cost to consumers for accommodating electric vehicles, renewables and electricity storage, and make sure that all consumers benefit from these technologies.

‘This will mean driving a harder bargain with network companies to ensure that households who need it always have access to safe and secure energy at a fair price.’ 

The future savings won’t help mitigate the money that consumers are losing now. 

The news comes energy providers continue to endure price hikes and 750,000 households face extra £127million to their bills following the collapse of eight small energy suppliers.

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