EDF accepts energy distribution network proposal from Ofgem

EDF became the second utility to agree on the proposed rules of Ofgem, a gas and electricity regulator, on how much energy firms can invest in power distribution networks from next year up to 2015.

The company accepted the Ofgem deal despite criticisms from the energy sector, which accuses Ofgem of not allowing other firms to get high earnings from energy projects. The 4.7 per cent pre-tax rate of return endorsed by Ofgem on electricity network investments is well below the 5.1 per cent allowed by the water utility regulator.

EDF defended its recent move, saying that it is currently developing plans to enhance operational efficiency of its networks to maintain shareholder value even though with lower rate of return.

EDF has produced around a fifth of the UK’s needed electricity from its wind farms, and nuclear and coal power plants. Currently, the energy firm provides capacity to 25 per cent of the UK’s population through its power distribution networks, and supply electricity and gas to more than 5.5 million residential and business customers.

Meanwhile, the energy company is planning to sell its electricity distribution network in the UK, with bids expected to be received early next year and a final sale to be announced in March. Among prospective buyers include the UK-based Scottish and Southern Energy (SSE), in partnership with Canada’s Borealis Infrastructure Management. National Grid, the UK’s electricity and gas network operator, and Canada Pension Plan are also planning to bid.

Ofgem’s proposal affect as well networks run by SSE, which already had accepted the agreement; and the UK subsidiaries of Germany’s E.ON and Spain’s Iberdrola, who have yet to respond.