By Daniel Hunter

Ofgem has today (Monday) announced up to £24.2bn to deliver new and upgraded infrastructure for Britain’s gas and electricity networks.

Of this, £4.5bn will only be made available over the course of the new, longer price control period of eight years (1 April 2013 — 2021) if companies are able to justify this expenditure. The cost of running and maintaining Britain’s energy networks up to 2021 brings the total package to £38.2bn.

The proposals earmark up to £15.5bn to upgrade the high voltage electricity transmission network in England and Wales and high pressure gas transmission network across Britain, both operated by National Grid. This investment will help connect new sources of energy generation and ensure the continued reliable transportation of gas and electricity to homes and businesses. Major projects include the building of a sub-sea link to connect Scotland with England and Wales.

Ofgem has improved funding arrangements to mitigate the visual impact of new and existing infrastructure. There will be £500m initially available for transmission companies in relation to existing infrastructure in areas of natural beauty. For new infrastructure, approximately £470m will be available to enable undergrounding.

Today’s proposals include £8.7bn of investment to help ensure Britain’s low pressure gas networks, which deliver gas to homes and businesses, remain safe and reliable. Included in the package are strict targets for network companies to carry out carbon monoxide awareness initiatives. There will also be funding to enable the connection of around 80,000 fuel poor households to the gas grid, helping them benefit from cheaper fuel.

“Ofgem’s new and innovative price control — RIIO — delivers a sound regulatory environment that protects consumers by attracting the energy infrastructure investment that Britain needs at a fair price," Ofgem Chairman, Lord Mogg said.

"This provides a framework of strong incentives and penalties to stimulate the innovative and efficient operations of Britain’s energy companies.”

As Ofgem’s Project Discovery in 2009 showed, Britain faces an unprecedented need to invest to replace ageing infrastructure, meet environmental targets and deliver secure supplies.

The increased investment needed to secure the robustness of the energy networks will have an impact on household bills. Including the proposals of the Scottish transmission companies and companies’ operating costs, it is estimated that annual household bills will increase by an average of £12 each year. This amount is not cumulative — for example at the end of the price control in 2021 bills will be around £15.10 higher than today.

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