Manufacturers support calls for better energy network regulation

The manufacturers' organisation EEF has welcomed a parliamentary report which criticises Ofgem for allowing the operators of Britain energy networks to make "greater than expected profit".

The report, released on Monday by the Energy and Climate Change Committee, looked into the costs of distributing energy to British homes and businesses. ‘Network costs’ were found to be unnecessarily high, with operators making “greater than expected profit”, despite Ofgem regulation.

These costs – which make up 23% of an energy bill – are passed on to businesses by gas and electricity suppliers who are charged by the network companies for using their transmission and distribution infrastructure. 

“Ofgem must get its act together and scrutinise their near-monopolies more effectively,” said committee chairman Tim Yeo.”Network costs are one of the main reasons dual-fuel bill have risen in recent years.”

Industry response

EEF’s head of climate and environment Gareth Stace said the report was good news for businesses as well as households.

“For a large energy-intensive manufacturer, network costs can make up in excess of a quarter of energy bills and as such it is essential that every step is taken to ensure value for consumer money,” said Stace. “An incoming Government must take heed of the report’s recommendations and ensure due attention is given to this area.”

The Committee recommended that Ofgem should encourage the roll-out of more efficient network technology, such as smart grids, while also connecting smaller energy providers to the grid to stimulate competition. It also said Ofgem should impose a 15-month notice period to give energy suppliers warning before network price changes

Watchdog response

Responding to the criticism, Ofgem said it was already implementing some of the changes suggested by the report, although it claimed its regulation “has delivered value for money”.

“Britain’s energy network is 17% cheaper in real terms than 25 years ago, £80bn of investment has been secured, and reliability has improved by 30%,” said an Ofgem spokesperson. “We are in the process of implementing a number of the actions the report highlights, including introducing more competition to networks and looking to increase the notification period of network charges.

“Additionally, we estimate that our innovation stimulus will see companies realise around £900m of benefits to consumers in the next eight years.”

Brad Allen

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