By Daniel Hunter
Ofgem has announced proposals to upgrade and renew Britain’s electricity and gas networks, including funding £17 billion of investment.
The majority of the proposed investment, around £15 billion, would include the upgrade and renewal of the high voltage electricity network in England and Wales and the high pressure gas networks across Britain.
However, for the average customer the news isn't entirely good, as it could see household energy bills rise £7 this year and £15 by 2021.
These networks are operated by National Grid and the package would fund major projects such as new sub-sea electricity cables linking England/Wales and Scotland. The building of these critical infrastructure projects could create around 7,000 jobs, mainly in the construction supply chain.
The money would fund the continued maintenance across Britain of the gas distribution network, in particular the gas mains replacement programme. In addition, the proposals would enable the gas distribution companies to connect around 80,000 fuel poor households to the gas network. The proposals will also enable funding for companies to develop carbon monoxide awareness initiatives.
“As Ofgem’s Project Discovery set out, Britain faces an unprecedented need to invest to replace ageing infrastructure, meet environmental targets and deliver secure supplies," Ofgem Chairman, Lord Mogg stated.
"This needs to be carried out at a time of global financial uncertainty, which makes attracting investment difficult but possible.
“In addition, through Ofgem’s RIIO price controls we are driving improvements in company performance to ensure costs are kept as low as possible for consumers by incentivising efficient investment and penalising poor performance. Our ‘vanilla’ weighted average cost of capital of around 4.5% (6.7-7.0% cost of equity) achieves these criteria.”
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