National Grid has revealed it will share some of the excess cash it has made from trading energy via its electricity cables ahead of schedule, to help lower bills for energy users amid the deepening cost of living crisis.
Market regulator Ofgem has approved its request to pay £200m to UK households over the next two years, instead of waiting for a five-year review period to end.
The grid operator would be required to pay the money as part of its deal with Ofgem, but the money can now be sent over a shorter timeframe.
Its excess funds come from energy trading with subsea cables that connect France, Belgium and Norway with the UK’s power grid.
The UK sells spare energy resources to the continent when it has excess supplies, such as if wind turbines generate more power than required.
Ofgem’s cap and floor regime sets a yearly maximum (cap) and minimum (floor) level for revenues interconnector licensees can earn over a 25-year period.
Usually, revenues generated by the interconnector are compared against the cap and floor levels over five-year periods.
National Grid is not allowed to make more than a certain amount of money from its cables, so excess has to be paid back to consumers.
The regulator hasn’t yet decided how the money will be paid back to households.
John Pettigrew, chief executive of National Grid, said: “While National Grid’s impact on customer bills is relatively small, we strive every day to keep our costs as low as possible. Given how challenging the current rise in overall energy costs is for people across the country, we want to play our part in helping reduce consumer bills.”
Jonathan Brearley, Ofgem chief executive said: “This early payment of £200m ensures consumers get value for money sooner from our regulatory framework.”
“We’re now working at pace to ensure this money is returned to the consumer in the fastest and most impactful way.”