Monday 7 September 2020 3:31 pm

National Grid warns watchdog spending curbs risk power cuts

The operator of the UK’s electricity networks has today warned that Ofgem’s new price control regulations could put the country at risk of power blackouts. 

In response to the energy watchdog’s consultation on new controls on how much energy companies can invest and spend, National Grid slammed the proposals as “unacceptable”.

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Under the so-called draft determinations, Ofgem plans to halve the profit that firms can make in order to lessen the burden on consumers.

The controversial spending plan will save the average consumer £20 on their energy bills, but has met with a furious response from the industry.

National Grid today became the latest firm to voice its disapproval at the plan, saying that it would risk “inhibiting our ability to maintain resilient and reliable networks”, which could lead to power cuts. 

It added it would also “endanger the critical investment required to put the UK on the path to meet net zero targets”.

On a call with investors, National Grid chief executive John Pettigrew said the proposals would increase the “risk profile of our networks, they will jeopardise the UK’s transition to net zero, and with the low returns on offer, they will dampen incentives and innovation, and limit our ability to help the green recovery.”

According to a letter sent to Ofgem chief executive Jonathan Brearley last week, the draft determinations would see the risk of power cuts increase by 24 per cent over the next five years.

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This is because the proposals limit the amount that National Grid and other network operators such as Scottish Power can invest into the critical infrastructure.

In its business plan, the FTSE 100 company said it would invest £10bn into the network over the next five years – but the watchdog said it could only fund half of this.

In the letter, Nicola Shaw, chair of National Grid Electricity Transmission, called for Ofgem to consider a “revised package” in order to “deliver a reliable network service, enable the green transition to net zero and provide a fair return for investors”.

In response to National Grid’s complaints, an Ofgem spokesperson said: “We’re unlocking unprecedented funding for projects that cut carbon emissions to create a green, fair and secure energy system for consumers now and in the future.

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“Investment in energy infrastructure comes from consumers’ bills, so we expect companies to run themselves efficiently and accept lower returns in line with current market conditions. 

“Equally Ofgem will only green-light investment proposals where there is robust evidence to support them. This will help keep network charges affordable as investment increases to help fight climate change and maintain security of supply.”