National Grid PLC (LSE:NG.) has accepted regulator Ofgem’s most recent price control proposals, designed to keep a grip on the UK’s locally monopolised energy distribution sector.
RIIO-ED2, the new set of controls, aims to incentivise the UK’s 14 electricity distribution network operators to invest in the grid, cut carbon emissions and lower costs, including £22.2bn of funding.
This is designed to prepare network operators to “deliver net zero” at the lowest cost, according to Ofgem.
Network operators charge suppliers for operating the UK’s power grid, with these costs ultimately being passed onto customers, making up around 11% of an average bill.
Map of network operators in the UK and Ireland - Energy Networks Association
“These price controls will further accelerate our delivery of smart, decarbonised electricity distribution networks in the UK, at the lowest cost to customers,” National Grid said.
RIIO-ED2 (as revenues are set using incentives, innovation and outputs) will be in place from April this year until March 2028, with National Grid saying it would share more detailed plans this summer.
It has already earmarked £40bn worth of investment between 2021 and 2026 to boost its transition to net zero.
Since RIIO-ED1 was introduced in 2015, networks’ carbon footprints have been reduced by 49% and the number of power cuts by a fifth, according to trade body Energy Networks Association.