24 February 2017

Ofgem reduces National Grid's spending allowances for its transmission price controls

Ofgem has confirmed it will reduce National Grid's spending allowances in its current price controls for running the high voltage electricity grid and high pressure gas main by £185 million.

In May last year we launched a mid-period review of the 2013 to 2021 energy transmission price controls. In August we announced a consultation on our minded to decision to reduce National Grid's spending allowances by £185 million.

The final changes in allowances are as follows:

·      A reduction in National Grid's allowances for the high pressure gas pipeline price control by £168.8 million. This is because the Avonmouth gas pipelines it planned to build are no longer needed. 

·      A reduction in National Grid's allowances for the high voltage electricity grid price control by £38.1 million. This is because less fault protection works are needed due to fewer generators connecting to the high voltage grid. This has not affected the reliability of the high voltage network.

·      An additional £21.5 million for system operation. The electricity system is going through major changes as we move to a low carbon economy. So National Grid (as system operator) has a bigger role to play. This includes providing additional supply and demand balancing services.

Changes to National Grid's revenue will take effect from April 2018. 

Ofgem has also opened a consultation on making further changes to the price control allowances of transmission and gas distribution companies. This includes proposals to reduce National Grid Gas Distribution's allowances by £54m. This reflects that some work on its medium pressure gas mains will not be delivered in this price control period.

                                                        -ends-

Notes to editors

1. A copy of Ofgem's decision on mid-period review is https://www.ofgem.gov.uk/publications-and-updates/mid-period-review-decision 

The review did not re-open the price control (for example changing key financial aspects such as the allowed cost of capital).

A copy of Ofgem's consultation on further changes to allowances of transmission and gas distribution companies under parallel work for the mid-period review is here https://www.ofgem.gov.uk/publications-and-updates/consultation-mid-period-review-parallel-work

2. Ofgem has also published four reports today on the 2015/2016 year of the price controls for electricity distribution, gas distribution, gas transmission and electricity transmission. The reports show that the number of power cuts on local electricity networks continues to fall. They are now almost 50 per cent below the level in 2002. By the end of 2016, 40,000 more fuel poor homes had been connected to the gas grids. Customer service continues to improve with the majority of network companies meeting or beating customer service targets. The reports also set out the spending of network companies against allowances and their forecasted returns.  

Links to the reports are below:

RIIO Electricity Transmission Annual Report 2015-16 - https://www.ofgem.gov.uk/publications-and-updates/riio-electricity-transmission-annual-report-2015-16

RIIO Electricity Distribution Annual Report 2015-16 - https://www.ofgem.gov.uk/publications-and-updates/riio-electricity-distribution-annual-report-2015-16

RIIO Gas Distribution Annual Report 2015-16 - https://www.ofgem.gov.uk/publications-and-updates/riio-gas-distribution-annual-report-2015-16

RIIO Gas Transmission Annual Report 2015-16 - https://www.ofgem.gov.uk/publications-and-updates/riio-gas-transmission-annual-report-2015-16

3. About Ofgem

Ofgem is the independent energy regulator for Great Britain. Its priority is to make a positive difference for consumers by promoting competition in the energy markets and regulating networks.

For facts, figures and information about Ofgem's work, see Energy market facts and figures.

Follow us on Twitter @ofgem

For further press information contact:

Ofgem press office

07766 511470

0207 901 7225