Energy plans may cut £45 a year from bills

Energy regulator Ofgem is proposing to cut consumers' bills by £45 a year from 2021, largely by reducing the rate of returns to investors.

Ofgem wants to set the returns at 4% - about 50% lower than under the previous price controls - to save £30 a year.

The other £15 would come from November proposals to reform network charges.

Ofgem's plans for revising the energy system would also help customers benefit from new technology such as electric vehicles and renewables.

An Ofgem spokesman told the BBC: "In essence, we are basically reducing the amount of money firms can earn for transporting electricity and gas to your home."

The regulator also wants to offer incentives for electric vehicle owners to be able to charge their cars outside the evening peak time - potentially with a smart charger while parked at work.

And it wants to bring in a new system to make more efficient use of grid capacity, possibly by sharing it between different users.

'Fair deal'

Jonathan Brearley, Ofgem executive director for systems and networks, told BBC Radio 4's Today programme the plans were important because "our energy system is changing".

He added: "People in the future may well want to charge their electric cars and install solar panels on their houses and communities may even want to build their own wind farms. What we need is a system that supports this at least possible cost.

"Our job is to look after the long-term interests of consumers and strike a fair deal between their shareholders and those consumers.

"For example, if we have a system where the way we could connect electric cars is more flexible - that allows us to move demand, that means we have to build fewer wires, which means a lower investment overall."

• Energy bills to be capped in new year

• Price cap will be good deal for customers, says Ofgem boss

• Ofgem orders energy firms to improve complaints handling

The proposals produced a mixed response from groups associated with the industry

National Grid said it was "disappointed" with the proposals.

"In order to deliver the major capital programme required across our networks in a rapidly-changing market, we need to ensure the regulatory framework also provides for fair returns to shareholders and enables us to continue to deliver world-class networks for consumers."

However, Citizens Advice was much happier with the plans.

Its chief executive Gillian Guy said: "Energy network companies have had it too good for too long. Ofgem's commitment to a tougher price control should curb the excess profits networks have been allowed to make.

"This is good news for people as this should result in lower bills."