TPCR4 has authorised funding for more than £5 billion of investment in Britain's gas and electricity transmission systems over the next five years.
This unprecedented 100 per cent increase in authorised investment, since the last price controls were set, will enable network operators to maintain the current high levels of performance of their networks by replacing ageing assets.
It will also help Britain meet climate change objectives by connecting and delivering more low-carbon generation. Greater security will also be brought to the nation’s gas supplies by building and improving connections to new import and storage facilities to the national gas network.
A 4.4 per cent rate of return on capital provides scope for companies to out-perform the price control by running their networks more efficiently. The price control is also flexible and automatically allows the companies to earn more revenue in response to an increase in demand for connections to the transmission networks.
Ofgem has put in place a safety net to protect customers against any substantial shortfall in investment against the companies’ plans. If a company’s investment falls 20 per cent below the amount allowed we will be able to review whether the allowances remain appropriate.
To fund these investments, overall transmission charges to consumers will initially increase by 8 per cent against the current revenue allowances for 2006-2007. To reflect rising investment levels electricity transmission revenues will then increase by a further 2 per cent above the rate of inflation each year thereafter, while gas transmission revenues will increase in line with inflation.
The effect on domestic customers will however be relatively small as transmission makes up only 3 percent of household energy bills.