The energy regulator has laid out proposals for companies to spend billions more on green investments over the next five years.
Ofgem has run into opposition from energy network companies after it told them to spend more of customers’ bills on green investment and less delivering returns to shareholders.
The regulator said its plans for the next five years would see £25bn allocated to maintain and operate the networks as well as supporting the growth of clean energy.
A further £10bn could also be made available for net-zero investment on a case-by-case basis for projects “that deliver decarbonisation at the lowest cost to consumers”.
National Grid and SSE, two of the biggest operators in the sector, claimed that the plans jeopardised the transition to a net-zero carbon economy, though they were welcomed by Citizens Advice.
Under Ofgem’s price control system, the regulator assesses plans by network operators over the next five years and sets limits on the profits that they make.
The companies – separate from the energy supply firms which directly bill consumers – are responsible for the transmission of gas and electricity and their charges typically make up almost a quarter of household bills.
Ofgem is proposing to cut the rate of return to these companies to an “unprecedented low level” so that “less of consumers’ money goes towards network companies’ profits, and more towards driving network improvements”.
It says this will save £3.3bn over five years while further efficiencies would save another £8bn.
The regulator said the plan as it stands would knock £20 off the network charge element of household energy bills – though that would be offset by an increase in investment and charges expected to come later in the price control process.
Ofgem chief executive Jonathan Brearley said: “Ofgem is working to deliver a greener, fairer energy system for consumers.
“Now more than ever, we need to make sure that every pound on consumers’ bills goes further.
“Less of your money will go towards company shareholders, and more into improving the network to power the economy and to fight climate change.
“Ofgem’s stable and predictable regulatory regime will continue to attract the investment Britain needs to go further and faster on decarbonisation.”
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National Grid said it was “extremely disappointed” with the plans and would press for changes that incentivise investment and protect consumers ahead of a final decision in December, to take effect from next year.
The company said: “This proposal leaves us concerned as to our ability to deliver resilient and reliable networks, and jeopardises the delivery of the energy transition and the green recovery.”
SSE said it was “disappointed and deeply concerned”.
Rob McDonald, managing director of its subsidiary SSEN Transmission, said: “Ofgem’s draft determination is a barrier towards achieving net-zero and damaging to the green economic recovery.”
Scottish Power chief executive Keith Anderson said: “Slamming the door in investors’ faces by offering one of the lowest rates of return of any developed country traps the UK in an economic cul-de-sac.”
But Citizens Advice chief executive Dame Gillian Guy said: “Ofgem has struck the right balance between shareholder returns and value for money for energy customers, while making sure networks can continue to attract investment.”
Shares in National Grid and SSE lost 5.5% and 4% respectively during Thursday trading.