Ofgem to grant additional £1 billion to upgrade grids

UK energy regulator Ofgem has announced to give £1 billion additional funding to the country’s electricity network to help connect new renewable sources.

As part of the investment plan, the regulator has now approved £319 million worth of funding for network upgrades starting April 2010. Ofgem informed that it will continue to examine energy companies’ applications for the remaining £764 million grant.

Stuart Cook from Ofgem informed that the grants will enable renewable energy sources to be connected to the power grid. He further added that the £1 billion funding is in addition to the £3.8 billion investment earlier given by Ofgem to three power transmission companies – namely National Grid, SP and Scottish Hydro-Electric.

The news of the funding came after Ofgem earlier this month revealed that all of the seven power distribution network owners in the UK had agreed on its price control plan. The new Ofgem policy controls the revenues that power companies can generate from their ventures.

The Senior Partner for Local Grids of Ofgem, Steve Smith, earlier said that the energy regulator had set a fair price control for the companies to profit, while enabling them to maintain high performance and adapt their networks to low carbon market. However, several network operators are complaining that the margins set by Ofgem are too slim compared to other industries.

Ofgem only permitted the companies a 4.7 per cent profit on their investments in power infrastructures, lesser compared with the 5.1 per cent rate allocated by Ofwat, a water regulator. Ofgem’s price control plan is believed to affect the distribution networks operated by the UK subsidiaries of EDF, Scottish and Southern Energy, E.ON and Iberdrola.