UK regulator pledges £24bn to energy upgrade

The British energy regulator Ofgem is allocating £24.4 billion to fund the upgrading of the country's gas and electricity grid, the agency said yesterday.

The British energy regulator Ofgem is allocating £24.4 billion (Dh145.09bn) to fund the upgrading of the country's gas and electricity grid, the agency said yesterday.

That includes an additional £2bn, which was not a part of initial plans.

But advocacy groups said it would do little to help the country's poorest households, who were at increasing risk of "fuel poverty".

"A toxic cocktail of rising wholesale prices, the high cost of energy reforms and cuts in incomes for many households means fuel poverty levels are set to sky rocket without radical action … to fuel poverty-proof the homes of those on the lowest incomes," Derek Lickorish, the chairman of the government-backed Fuel Poverty Advisory Group (FPAG), told the BBC yesterday.

Ofgem's proposals form the mainstay of efforts to radically overhaul Britain's ageing energy infrastructure by 2020 as set out in its energy-security review Project Discovery.

"This provides a framework of strong incentives and penalties to stimulate the innovative and efficient operations of Britain's energy companies," Lord Moog, Ofgem's chairman, said yesterday.

Initial proposals made by the regulator, which has tried to curb energy company spending plans in order to provide value for the consumer, have been slammed by the country's biggest energy distributor, National Grid.

"In analysing the proposals, we find numerous errors and questionable judgements," the company said.

National Grid said in a separate statement yesterday it would take time to review the updated proposals before deciding on whether they were acceptable or not.

If it does choose to challenge Ofgem's decision, it has until March to refer the matter to the UK competition commission.

The regulator said its final plans earmarked up to £15.5bn to upgrade transmission networks for both gas and electricity, assets operated by National Grid.

Ofgem puts the cost of running and maintaining Britain's networks to 2021 at £38.2bn in total, meaning it has cut the total investment bill estimated by energy companies in their business plans by 16 per cent.

The regulator said it had cut £7bn from the total cost of work on UK transmission networks planned by energy firms and said yesterday it would permit transmission companies to add an average £12 to annual energy bills for the next eight years to pay for the electricity and gas grid upgrades. Fast-rising consumer energy bills have caused anger in Britain among households squeezed by spiralling price rises and muted wage growth.

The FPAG said yesterday many more UK households would be at risk of "fuel poverty" with a further 300,000 under threat this winter alone.

The group, which is funded by the UK department of energy, estimates nine million people could meet that criteria by 2016.

"With a cold winter, welfare reforms cutting incomes, and all at a time of austerity measures and other rising household costs, the plight of the fuel poor has never been more serious," Mr Lickorish said.

"Millions are living in misery due to high energy bills, yet time is running out for the government [to act]."

* with Reuters