New proposals to reduce energy bills by £45 a year

Energy Regulator Ofgem have proposed plans for a “smarter, fairer and cleaner energy system which is fit for the future and saves consumers money.” These new measures are expected to reduce consumers bills by £45 per year from 2021.

The savings are said to predominantly come from reducing the rate of returns for investors, as Ofgem wants to set the returns at 4%, which is approximately about 50% lower than under the previous price controls. This change is set to raise £6.5 billion from the companies running Britain’s electricity networks, as investment into cleaner power – including renewable energy and electric vehicle charging.

This report follows Ofgem’s proposals last month to reclaim electricity grid charges by announcing fixed charges that would mean houses that generate their own electricity (such as the 1 million homes fitted with solar panels), would pay a “fair share” of charges to the grid, which could increase energy bills for these households as a result, but in turn reduce the load on other consumers.

Jonathan Brearley, executive director for systems and networks, said: “Our proposals for the new network price controls and charging reforms will help build a lower cost, fairer energy system which is fit for this smarter, cleaner future. We want to cut the cost to consumers for accommodating electric vehicles, renewables and electricity storage, and make sure that all consumers benefit from these technologies. This will mean driving a harder bargain with network companies to ensure that households who need it always have access to safe and secure energy at a fair price.”

Gillian Guy, the Citizens Advice chief executive, said: “Ofgem’s commitment to a tougher price control should curb the excess profits networks have been allowed to make. This is good news for people as this should result in lower bills.”

References:

https://www.ofgem.gov.uk/publications-and-updates/ofgem-cuts-costs-smarter-fairer-and-cleaner-energy-system
https://www.bbc.co.uk/news/business-46602230
https://www.theguardian.com/money/2018/dec/18/energy-bills-ofgem-national-grid
https://www.telegraph.co.uk/business/2018/12/18/ofgem-threatens-tougher-price-controls-energy-firms-shake-up/
https://www.yorkshirepost.co.uk/business/ofgem-tables-proposals-to-re-wire-britain-s-energy-system-1-9497873