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Power companies allowed to make more money over next five years as Ofgem eases proposals

Published: 08:44 08 Dec 2020 GMT

National Grid -
Ofgem wants a £40bn green energy drive

Britain’s power companies have been given some leeway in how much money they can make over the next five years by Ofgem

The regulator's final determination for the sector's investment returns and spending for the period April 2021-March 2026 has been eased after the companies complained proposals in July were too tough.

The changes would still mean bills will come down by £10 per household or by £2.3bn in total, said the regulator with £132mln earmarked for the most vulnerable.

The original proposal in July would have allowed the power companies to make a return on equity of 3.95% but this has been relaxed slightly to a more generous 4.3% in today’s final determination.

Ofgem also said it is proposing a £30bn funding allowance, up from £25bn previously, to invest in energy networks and systems as part of the plan for the UK to hit Net Zero carbon targets.

“Crucially, we have designed an adaptable price control that will enable allowances to flex quickly as new investment needs become clearer over the course of the next five years - potentially at least a further £10bn,” it said.

In a statement, Jonathan Brearley, Ofgem's chief executive added: "Our £40bn package massively boosts clean energy investment. This will ensure that our network companies can deliver on the climate change ambitions laid out by the Prime Minister last week, whilst maintaining world-leading levels of reliability."

National Grid PLC (LON:NG.) said it would study the final proposals to see whether it delivers sufficient investment to maintain resilient and reliable networks before it makes any decision to appeal any change to its licence, but said this is unlikely to be late February 2021 at the earliest given the statutory timelines.

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