Changes to energy transmission’s charging structure will lead to price increases of 8% said regulator Ofgem today.
The country's four electricity transmission companies, dominated by National Grid Plc, could increase the amount of money they are allowed to spend upgrading their network infrastructure by 100% in the next five years.
Ofgem said energy bills would rise after it allowed £5 billion in capital expenditure upgrading the ageing power network. National Grid had been arguing for £4.9bn.
To fund these investments, overall transmission charges to consumers will initially increase by 8% against the current revenue allowances for 2006-2007, the regulator said.
To reflect rising investment levels, electricity transmission revenues will then increase by a further 2% above the rate of inflation each year thereafter, while gas transmission revenues will increase in line with inflation.
It said the effect on domestic customers will however, be relatively small as transmission makes up only 3% of household energy bills.
But an Ofgem spokesman told CIO the cost to businesses was more difficult to predict, but that transmission and connection costs to large businesses were certainly a more major consideration.
“Small-to-medium sized businesses may not feel the impact of increased transmission costs as much as big business. Large companies strike their own contracts, and it is a significantly much greater part of their bill,” he said. “But is subject to commercially sensitive agreements between those companies and their suppliers.”
The new ruling could yet be referred to the Competition Commission, should the National Grid reject the proposal. But once finalised the new controls will run for another five years, before Ofgem reviews them again, in 2012.
Domestic customers' gas bills could suffer from increases next year after another Ofgem ruling the country's gas distribution network (GDN) companies could invest £946 million, or 11% more than this year’s predicted expenditure.
Ofgem has reviewed the price controls for the four electricity and gas transmission companies which own Britain’s high-voltage national networks and the national gas pipeline: National Grid Electricity Transmission; National Grid Gas NTS (National Transmission System); Scottish Power Transmission and Scottish Hydro-Electric Transmission.