What is the energy network?
Every year Great Britain uses enough electricity to boil over two trillion kettles. We get through more than double that in gas. The network is the system that brings all this energy to your homes and businesses. It’s made up of thousands of miles of pipes and cables. Enough, in fact, that if you stretched it all out it could reach to the moon and back.
Here’s how it fits together.
How much does it cost?
As of April 2016 a standard dual fuel bill based on typical consumption is around £1,070 a year. Of this, around £265 pays for the network costs your supplier is charged by the transmission and distribution companies.
What does Ofgem do?
We use price controls to limit what the transmission and distribution companies charge. We also set targets for reliability, customer service and environmental performance. Alongside this, we encourage companies to innovate to cut costs for consumers and help the network meet Britain’s future energy needs. Together, these parts of our work make sure the companies operate efficiently and offer value for money.
Although we limit prices, we have to let the companies charge enough to cover their costs and get a reasonable return on the money they invest.
Our controls are needed because the network is a monopoly – you don’t normally get to choose which company you use. By contrast, we don’t regulate the prices charged by generators or suppliers. This is because they’re part of a competitive market: you can choose a supplier, and suppliers can choose where they buy their energy.
Why does the network need investment?
Investment means the companies can afford to upgrade and maintain pipes, cables, substations and other equipment. This keeps your electricity and gas connections reliable.
Much of today’s network was built in the 1950s and 1960s, and investment has been needed to bring it up to modern standards. There have been particularly big changes since 2005, in response to the rise of renewable energy.
To support this, we’ve allowed a carefully planned increase in network costs since 2006, finishing in 2015. Despite this, network costs are still lower than they were before privatisation. Here’s how they’ve varied over time.
Who owns and runs the network?
The network used to be state-owned, and was privatised in 1986 for gas and 1990 for electricity. Today the gas and electricity transmission and distribution sections are owned by separate companies, and there are different owners in different parts of Britain. The exception is gas transmission, which is owned and operated by National Grid Gas.
Behind the numbers
- Information on 1990-2006 from our review of network regulation (RPI-X@20), adjusted in 2014.
- Information on 2006 onwards from data collection for our Supply Market Indicator.
- Predictions up to 2020 take account of expected reductions following our electricity distribution price control (RIIO-ED1) and some increases in electricity transmission tariffs in response to continuing network investment. They do not take into account any future changes that may occur in the proportion of network costs borne by domestic rather than industrial and commercial customers.