UK’s Ofgem proposes reductions in National Grid’s spending

UK’s energy regulator Ofgem has proposed reduction in National Grid’s spending allowances for its electricity and gas transmission businesses.

Ofgem set the price controls for energy transmission and gas distribution from 2013 to 2021. As part of this, provision was made for a mid-period review of the outputs companies have to deliver for customers if there were material changes in Government policy, or changes in the needs of consumers and network users.

In May Ofgem opened a mid-period review into the energy transmission price controls.

–    In gas transmission Ofgem proposes to reduce National Grid’s allowances by £168.8 million as the Avonmouth gas pipelines it planned to build are no longer needed.

–    In electricity transmission Ofgem proposes to reduce National Grid’s allowances 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.

–    National Grid is also the system operator for the GB high voltage grid. The system is going through major changes as we move to a low carbon economy. National Grid now has a bigger role to play, for example in planning the future of the grid and managing additional supply and demand balancing services. In recognition of this Ofgem is allowing an additional £21.5 million.

Taking into account the additional allowance for National Grid’s system operator role the total reduction in allowances is £185.4 million.

Ofgem is consulting on its proposals and will make a final decision this autumn. Changes to National Grid’s revenue would take effect from April 2018.