Ofgem welcomes SGN’s contribution to consumers
Press release
Publication date
Industry sector
- Distribution Network
- Transmission Network
Ofgem has welcomed the voluntary contribution to consumers from SGN the gas network company that operates across Scotland and the south of England.
Jonathan Brearley, Ofgem’s senior partner for networks, said: “Network companies require a licence to operate, not just from the regulator, but from their own customers who must be confident they are getting good value for money.
“We are signalling again today that energy network companies need to prepare themselves for a tougher round of price controls from 2021 with lower overall returns.”
During the current price control Ofgem has secured additional savings of over £4.5 billion for consumers by a combination of reduced revenues or voluntary contributions from companies.
SGN, a consortium which includes SSE, has committed to make a voluntary contribution of £145 million in price control allowance terms to consumers.
Under Ofgem’s price control sharing mechanism* this will result in £84 million being returned to customers.
National Grid, Cadent and Scottish and Southern Electricity Networks, the electricity networks division of SSE, have already agreed to make voluntary contributions to consumers.
In total, voluntary commitments made by network companies so far will result in more than £650 million being returned to consumers.
Ofgem encourages the remaining gas distribution and electricity transmission companies to follow suit.
Notes to editors
- SGN’s statement on its voluntary contribution is here As part of the contribution, SGN is carrying out additional work totalling around £30 million to benefit customers by enhancing the resilience of its network, and to assist fuel poor households. The company will fund the majority of this spending.
- Ofgem sets price controls for the monopoly companies that run Britain’s gas and electricity networks. Gas distribution and energy transmission companies are now more than halfway through their 2013-2021 price controls. *The price controls include a sharing mechanism which splits any under and overspends of price control allowances between the companies and consumers.
- Forecast returns for gas distribution and energy transmission companies in the 2013-2021 controls are all at the higher end of expectations, partly due to significant improvements in efficiency. Customers share the benefits of efficiency savings in the form of lower charges which have helped to reduce network costs by 6 per cent since 2013 under Ofgem’s Revenue=Incentives+ Innovation+Outputs (RIIO) price controls.
- In July, Ofgem signalled that network companies need to prepare themselves for a tougher round of price controls from 2021.
- On 28 March National Grid agreed to voluntarily defer allowances from its electricity transmission price control. In current prices this means that National Grid is deferring around £589 million in allowances. The sharing mechanism results in around £332 million of this being returned to customers. In addition, National Grid has voluntarily pledged £150 million to a programme to fund heating systems in fuel poor households that are not connected to the main gas grids).
- On 8 November, SSE announced that Scottish and Southern Electricity Networks had agreed to make a voluntary contribution of £65.1 million in allowance reductions. Around £39 million of this will be returned to consumers through the price control sharing mechanism.
Further information
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