Upgrades to the regional electricity network will add an average of £3.76 a year to bills over the next five years, the regulator said yesterday.
About £6.5billion will be invested between 2010 and 2015 – but regulator Ofgem has told the companies responsible for the network that they must deliver on their plans for 17% less than they originally forecast.
Ofgem said its proposals aimed to protect consumers from “unnecessary price rises in today’s difficult economic environment”.
There are 14 electricity distribution networks and Ofgem controls the revenues their owners can collect.
Electricity customers now pay about £3.6billion a year for the distribution of electricity from the National Grid to homes and businesses.
This accounts for about a sixth of a domestic customer’s electricity bills, with a household paying typically about £67 a year for electricity distribution.
Ofgem said the proposed average annual increase in the distribution element was likely to be 5.3% – £3.76 a year for five years, although this will vary across the country.
The proposals cover funding for upgrades of the network that were largely built in the 50s and 60s, plus incentives for companies to invest in a low-carbon future.
Ofgem said firms would earn rewards for “outstanding” customer service but would be penalised and forced to pay compensation for poor service.
The 14 network operators are owned by seven groups, including four independent network operators.
The seven companies are CE Electric UK, Central Networks, EDF Energy networks, Scottish Power, Scottish and Southern Energy, Electricity North West, and Western Power Distribution.
Yesterday’s proposed cuts in capital expenditure range from 22% at CE Electric’s network covering South and East Yorkshire and northern Lincolnshire through to 8% for Scottish Power Distribution and Scottish and Southern Energy Hydro.