Energy bill rises not enough, says National Grid

Proposed increases in energy bills to pay for more investment in the UK's gas and electricity networks are insufficient, National Grid says.

The energy regulator Ofgem wants energy firms to spend an extra £22bn over eight years to upgrade its networks.

That means bills, once figures from Scotland are included, will steadily rise to leave them £20 higher in 2021.

But National Grid says the proposed funding is about 20% less than it needs to carry out the work properly.

The proposed increases would raise household bills by about £7 in 2013, climbing steadily each year to reach £15 in 2021.

But Ofgem's approval of transmission plans for Scottish Power and SSE in April this year means that bills will actually rise by an average of £15 a year over eight years and reach £20 in 2021.

National Grid, which will carry out the bulk of the work, said Ofgem's plans "differ substantially" from its own business projections.

"While the information currently available is limited, we believe that these initial proposals will not appropriately incentivise the essential investments necessary to provide safe, reliable networks for the UK consumer and avoid delays to the achievement of the UK's environmental targets," the National Grid said in a statement.

Higher bills

Most of the upgrades will be implemented by National Grid because it runs the high voltage and high pressure gas transmission networks.

About £15bn of the £22bn investment being proposed by the regulator will go towards the improvement of the electricity network in England and Wales, and the gas networks across the whole of the UK.

The rest, approximately £7bn, will be spent on ensuring the low pressure gas networks, which deliver gas to home and businesses, are reliable and safe.

Energy firms had wanted to spend £21bn on revamping the electricity transmission system and to spend a further £9bn on its gas pipelines.

That would have meant average bills rising by between £15 and £20.

The average domestic dual fuel bill already stands at £1,310 a year.

'Unprecedented need'

Ofgem chairman, Lord Mogg said: "As Ofgem's Project Discovery set out, Britain faces an unprecedented need to invest to replace ageing infrastructure, meet environmental targets and deliver secure supplies.

"This needs to be carried out at a time of global financial uncertainty, which makes attracting investment difficult but possible."

The regulator said the work could create 7,000 jobs and secure Britain's energy supply.

The work could include new sub-sea electricity cables linking England and Wales with Scotland.

The proposals would also enable the gas distribution companies to connect around 80,000 "poor fuel households" to the gas network for the first time, and pay for carbon monoxide awareness programmes.

Ofgem is responsible for setting price controls on National Grid and the regional gas distribution companies, Scotia Gas Networks, Northern Gas Networks and Wales & West Utilities.

Ofgem's proposals will be published for consultation on 27 July, with final proposals due by December 2012.