Households are in line for a cut in their energy bills under new proposals from regulator Ofgem that would limit how much network operators can pay shareholders.
Ofgem said on Wednesday that the UK’s gas and electricity networks face a “tougher approach” that would deliver savings of more than £5 billion to consumers over five years.
Under its plans, a new regulatory framework would set a cost of equity range – the amount network companies pay their shareholders – of between 3% and 5% from 2021.
Some of the companies affected include Cadent, National Grid, SSE and Scottish Power.
Describing it as the “lowest rate ever proposed” for energy network price controls in Britain, Ofgem said it will result in lower returns for energy network companies and significant savings for consumers.
It estimates this would result in savings of about £15 to £25 per year on the dual fuel for consumers who pay for the network through their energy bills.
Ofgem’s other proposals under a new regulatory framework include changing to a default five-year price control instead of the current eight-year period and tougher requirements to put network companies’ business plans “under the microscope”.
Jonathan Brearley, Ofgem’s senior partner for networks, said: “The energy sector is rapidly changing and consumers must be confident they continue to get good value for money for the services the networks deliver.
“Ofgem’s stable regulatory regime allows companies to attract investment from around the world on behalf of consumers in Great Britain at the lowest cost. We will capitalise on this by getting network companies to work harder to deliver better value for consumers in the next price controls.”