UK regulator introduces tough controls aiming to cut energy bills.

FT: “UK energy regulator Ofgem has outlined tough annual price controls for power distributors that it claims will cut £2.1bn from customer bills – equivalent to £11 per household – and increase compensation for extended power outages.”
Ofgem’s price control settlement, published on Friday, will also see the network companies – which distribute energy into homes and businesses – spend £17bn over the next eight years to upgrade and maintain the UK’s local electricity network, and connect small-scale renewable generation.
In a further sign of a tougher stance towards power companies, the regulator has imposed a £39m fine on generators Drax and InterGen for failing to meet targets to improve the energy efficiency of low-income households.
Ofgem’s price targets, first outlined in July, were much tougher than companies were expecting and followed a period of intense political scrutiny of the energy sector as household bills increased.
Last November, five of the UK’s six network companies had their price control proposals rejected as the regulator ruled they “failed to deliver good enough value for customers”. Since then, £2.1bn has been cut from the plans.
From April, compensation payments for customers who experience power cuts will increase, more than doubling from £27 to £70 for those without power during severe weather.
The regulator has also audited the companies’ pension liabilities and said that because they had increased, the estimated bill reduction had been reduced by £1, from £12 a year per household as had been proposed in the July draft.
“The work these companies do accounts for around £100 of your annual electricity bill,” the regulator said. “Our announcement today will see this part of the bill deliver an average annual saving of £11. Including Western Power Distribution, which had its controls agreed early, the average bill will be £10 a year lower than it is today for the eight-year period of the control.”
The five companies who agreed price plans on Friday were SSE Power Distribution, Electricity Northwest, Northern Powergrid, UK Power Networks and SP Energy Networks.
SSE, which owns SSE Power Distribution, said it would “carefully examine the detail” of the regulator’s plans. “Ofgem’s final determinations propose a real reduction in the distribution share of the average household bill in SSE’s North of Scotland network area of around £27 next year and in its South of England network area of around £18,” it said.
….Ofgem announced a full competition review of the energy sector earlier this year. The Competition and Markets Authority has been seeking evidence that UK customers were suffering due to lack of competition. It is due to report its findings before December next year.”