Competition and Markets Authority (CMA) provisionally sides with Ofgem over its plans to reduce Energy Firms Returns
The Competition and Markets Authority has provisionally sided with Ofgem following the industry rebellion over restrictions on the returns an energy network company can make at the expense of consumer energy bills.
What happened?
Last year, Ofgem revealed its plans to restrict the amount of financial returns an energy network company could make on investing in the UK’s gas pipes, electrical cables and other national energy infrastructure.
Not long after the regulator announced its plans, the nation’s network companies rallied together to express their anger over the decision in what was dubbed as an ‘unprecedented rebellion’.
The companies argued that such huge cuts to their returns will lead to investment plans being in jeopardy and hinder the government’s plan to achieve NetZero emissions by 2050.
Ofgem did backtrack slightly after the outcry by raising the energy company’s allowed returns to rise from the originally suggested 3.95% to 4.3% over the next five years.
That wasn’t good enough for the network companies including Scottish Power and National Grid who took the matter to the Competition and Markets Authority to contest the plans.
What was Ofgem’s reaction?
Ofgem’s CEO Jonathan Brearley said that the ruling by the CMA was an ‘important step forward toward the goal of supporting investment needed to create a green economy and keep customer energy bills as low as possible’.
With energy bills set to rise for millions and the price cap being hiked to a record high there may be a fair few people that may dispute his claim of keeping bills low.
“Ofgem is fully focussed on keeping bills as low as possible for customers while supporting investment to net zero greenhouse gas emissions.
"We welcome today’s provisional announcement by the CMA as an important step forward towards this goal. The CMA has found in favour of Ofgem on most grounds of appeal, including the reduction in returns for investors.
"We will continue to engage with the CMA to finalise these price controls and look forward to working with the industry to deliver efficient investment which will benefit both consumers and the planet,” said Brearley.
Also read: Unprecedented rebellion on the cards as energy companies protest Ofgem pricing plans
Fight not over?
A spokesperson for National Grid said that the firm was disappointed by the decision by the CMA to uphold Ofgem’s proposal.
“We will now review the detailed documents to determine the CMA’s rationale for this provisional determination and will be responding within the statutory timeline,” the National Grid spokesperson said.
The CMA’s final determination on the issue is scheduled to be made by October.
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Further Reading
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