UK power companies accepted Ofgem price control plan

Ofgem, the UK’s gas and electricity market regulator, had announced last Friday that all of the seven owners of UK’s power distribution networks had already agreed to its plan for price controls for 2010 to 2015.

The price controls direct the revenues companies can produce from their ventures in the country’s power distribution infrastructure. Several network operators had complained however that the margins set by Ofgem are too slim comparing to other infrastructure industries.

The Senior Partner for Local Grids of Ofgem, Steve Smith, informed that the energy regulator had already 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. The scheme will further deliver energy to consumers at reasonable prices as well, he added.

Ofgem only permitted the companies a 4.7 per cent profit on their investments in power infrastructure, lesser compared with the 5.1 per cent rate allocated by Ofwat, a water regulator.

The electricity regulator further added that the seven companies will invest more than £7.2 billion in the next five years to upgrade their distribution networks, including a £500 million fund that will allow them to carry out a massive scale installation of smart grids and other related green technologies. Ofgem’s price control plan will affect the distribution networks operated by the UK subsidiaries of EDF, Scottish and Southern Energy, E.ON and Iberdrola.

In related news, it is expected that electricity bills across the country will increase £4.30 per year on average. The new price control will take effect from 1 April 2010 to 31 March 2015.