By Holly Williams
Britain鈥檚 energy watchdog has given the go-ahead to an initial 拢24 billion of investment to upgrade UK energy infrastructure, but revealed the move will push up network charges on household bills by more than 拢100.
Ofgem鈥檚 draft verdict on price controls for energy network firms approves more than 拢15 billion to be spent on gas transmission and distribution networks in the five years to 2031.
A further 拢8.9 billion is set to be committed to the nation鈥檚 high-voltage electricity network, which Ofgem said will power the biggest expansion of the grid since the 1960s, with another 拢1.3 billion being earmarked.
The funding will allow 80 major energy infrastructure projects to be completed by 2030 and comes amid a push by the Government to boost the UK鈥檚 renewables sector to help improve energy security.
But Ofgem revealed households are set to see the network charges on bills 鈥 which make up around a fifth of average annual bills 鈥 surge by 拢104 to 拢324 by 2031 to cover the cost of the extra investment.
The regulator said this will include 拢30 for gas networks and 拢74 for the electricity grid.
It deals a blow to hopes of lower bills after the latest energy price cap change came into effect on Tuesday, seeing a 7% drop to 拢1,720 per year, and with the latest forecast showing another 1% fall may be in store from October.
The regulator insisted that bills would be even higher 鈥 around 拢30 more 鈥 without the investment, because the funding will allow the UK to make 鈥渂etter use of our clean renewable energy so we are not having to pay for expensive gas plants to serve demand鈥.
It added that bills may not rise by the full 拢104, as more renewable electricity generation will lower wholesale power costs and shield households from volatile gas prices.
鈥淭aken all together the net cost of these investments on bills amounts to around 拢24 a year 鈥 or less than 40p per week 鈥 by March 2031,鈥 Ofgem said.
Jonathan Brearley, chief executive of Ofgem, said major investment in the energy networks is vital to 鈥渆nsure the system has greater resilience against shocks from volatile gas prices we don鈥檛 control鈥.
He said: 鈥淒oing nothing is not an option and will cost consumers more 鈥 this is critical national infrastructure.
鈥淭he sooner we build the network we need and invest to strengthen our resilience, the lower the cost for billpayers will be in the future.
鈥淗owever, this can鈥檛 be done at any price, which is why we have built in cost controls and negotiated a fair deal for both investors and consumers.
鈥淎nd we won鈥檛 hesitate to intervene if network companies don鈥檛 deliver on time and on budget.鈥
Ofgem said it had spent the past six months reviewing the plans put forward by energy network companies 鈥 electricity transmission owners, National Gas and gas distribution companies 鈥 and had proposed reductions of more than 拢8 billion.
This represents a cut of around 26% of the initial plans submitted.
It will now work with network companies before coming back with final investment plans for the next five year period, starting on April 1 next year.
Network companies gave mixed responses to the proposals.
Scottish and Southern Electricity Networks (SSEN), which is owned by SSE, said the investment plan 鈥渄oes not go far enough鈥.
It said more was needed to 鈥渄eliver the investible, financeable and ambitious framework required to unlock the unprecedented levels of investment needed to deliver lower and more stable bills鈥.
National Grid, which runs much of Britain鈥檚 electricity grid, said it was 鈥減leased to see Ofgem continuing to recognise the need for significant levels of investment in networks鈥.
It said it will review the detail 鈥渢o assess whether it delivers an investable overall financial package鈥.
Ofgem said the 80 new power projects the investment will help fund include boosting the grid鈥檚 capacity through new power lines, substations and other technologies, to handle the flow of electricity from new renewable sources.鈥
They will also include upgrades to over 4,400km (2,734 miles) of overhead lines and 3,500km (2,174 miles) of new circuits, including investments offshore 鈥 doubling the total build in the last decade, according to Ofgem.