Unprecedented rebellion on the cards as energy companies protest Ofgem pricing plans

Investment returns proposals

Growing Rebellion

Scottish Power and SSE have also thrown in their lot with National Grid setting the stage for an almighty showdown with the regulator that could ultimately have to be decided by an investigation by the Competition and Markets Authority.

Scottish Power slammed the proposals saying that Ofgem’s plans could “slam the brakes” on a green economic recovery.

“The financial crackdown could hit the reliability of Britain’s energy system and put barriers in the way of the UK’s net zero climate targets. Ofgem’s unprecedented financial cuts mean that crucial projects to help the UK to reach net zero have been left out of the spending plans for the next eight years and alienated investors who have historically prized Britain’s stable regulatory regime.

Investors are expecting a lower rate of return. That isn’t the concern. But they like predictability and stability and they have none of that with Ofgem,” said Nicola Shaw, the head of National Grid’s networks business.

Defending the proposals

In response to the complaints made by the energy network companies, Ofgem’s new chief executive Jonathan Brearley responded by saying that the proposals are the result of ‘extensive analysis’ to determine the fairest balanced between consumers and investment.’

Previously, Ofgem has been criticised by politicians and consumer groups for allowing energy company profits and their shareholder payments to increase at the expense of rising energy bills.

This criticism was one of the main driving forces behind the Labour Party’s pledge in the last election to nationalise the energy sector, scrap Ofgem and replace it with a new regulator.

Better for consumers?

Ofgem’s assessment of the proposals shows that it expects domestic energy consumers will be better off overall by as much as £2.3 billion under the plans. Energy companies, however, will suffer a hit of between £1.4 billion to £3.3 billion with a net cost of £133 million.

The energy companies argue that whilst the plans might prove beneficial to consumers it will only be for the short term. To achieve the NetZero economy laid out by the government, they argue that investment must increase and if that isn’t done now then it will be the consumer who will pay the price in the future.

The consultation ends this Friday. 

Further Reading

Ofgem to introduce new standards for smaller energy suppliers this winter

Ofgem’s Energy Supplier Licensing Review: what’s being planned part 1

New rules planned for Energy Suppliers as Ofgem vows to protect small businesses from unscrupulous Energy Brokers

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