Blog Post

Citizens Advice sides with Ofgem in network investment row

Richard Simmonds • Sep 16, 2020

Citizens Advice has placed its flag firmly on the side of the energy regulator adding fuel to the ongoing battle between Ofgem and energy network companies such as National Grid.

Save Consumers Money

Consumer group Citizens Advice has claimed that Ofgem could save UK consumers an extra £1.7 billion if it takes its planned regulations even further.

The planned proposals will result in energy network companies only allowed to make returns on their investments of just 3.95% over the next five years starting in April 2021.

The figure has angered companies who complain that the returns they’re allowed to make are half of what they’re used to and much of their investment plans have already been made.

National Grid has led the calls for the regulator to rethink its plans with its CEO even warning that they could result in blackouts across the country.

‘Must hold its nerve’

“Energy networks are aggressively pushing back against the regulator’s proposals. They’ve even claimed the price control will put more people at risk of blackouts and jeopardise the Netzero transition. But the only thing really at risk are the excessive profits these companies have made by overcharging consumers. The regulator must hold its nerve in the face of the significant pressure from the networks and look at whether it can go further,” said Citizens Advice boss Dame Gillian Guy.

Energy networks will be growing increasingly concerned that Ofgem will double down over its plans that will see the amount companies can earn on their investments halved now that it has found an ally in the form of Citizens Advice.

They’re also up against public opinion with many people likely to side with the bodies that are claiming they will save the public money on their energy bills.

Last week, National Grid upped its attacks on the proposals by suggesting that the Ofgem plans will put extra pressure on the nations energy supplies and compromise the government’s NetZero ambitions.

Citizens Advice has long been a critic of the amount of money energy networks are allowed to gain and has previously said that the companies earn “unjustified profits” under the current pricing regime.

Proposals will do little for consumers

Energy network companies show no signs of backing down and are doubling down on its pressure on the regulator.

Their main argument is that the plans will have little to no impact on consumer energy bills and that further investment is critical to improving the nation’s energy infrastructure as it moves towards a greener future.

“The proposals from the networks would keep bills broadly flat and were informed by tens of thousands of customers who participated in events across the country. Network costs are down 17% since the mid-90s despite record investment. Further investment in networks is needed now if we’re to maintain safe, reliable energy supplies, reach net-zero emissions and power a green recovery,” said David Smith, chief executive of the Energy Networks Association.

Ofgem strikes back

The energy regulator is due to decide on the proposals in December and as we draw closer to that date, we can expect the network companies to continue to pile on the pressure to make them change their mind.

“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. We also need to balance this with ensuring that Britain’s world-class stable regulatory regime attracts the right amount of investment,” said Ofgem.