SGN waives £145m of allowed revenues

Ofgem urges other energy networks to follow suit

Gas distribution network SGN has waived £145 million of allowed revenues, saying the voluntary contribution will help to maintain the integrity of the RIIO framework.

Under Ofgem’s price control sharing mechanism, £85 million of the forgone allowances will be returned to customers.

Ofgem senior partner for networks Jonathan Brearley, said: “Network companies require a licence to operate, not just from the regulator, but from their own customers who must be confident they are getting good value for money.

“We are signalling again today that energy network companies need to prepare themselves for a tougher round of price controls from 2021 with lower overall returns.”

As part of the contribution, SGN will also carry out additional work valued at £30 million to enhance the resilience of its network and assist fuel poor households, the majority of which will be funded by the company.

Ofgem says it has now secured additional savings of more than £4.5 billion over the current RIIO price control periods, including £650 million returned to customers as a result of voluntary commitments by networks.

National Grid agreed in March to relinquish £589 million of electricity transmission allowances, of which £332 million will be returned to customers. National Grid Gas Distribution, since renamed Cadent, pledged to voluntarily spend £150 million on a programme to install heating systems in fuel poor households that are not connected to the grid.

Earlier this month, Scottish and Southern Electricity Networks also waived £65.1 million of allowances, of which £39 million will be returned to consumers. Ofgem has encouraged other energy networks to follow suit.

After publishing a report in July which claimed energy networks were set to receive £7.5 billion in “unjustified profits” over the current price controls, Citizens Advice hailed the latest news as a victory for the charity.

Chief executive Gillian Guy, said: “Network costs are a significant part of high energy bills. With many consumers already paying over the odds for their gas and electricity, it is right that networks pay back the excess profits they’ve made.

“We have been calling for this on the back of energy network companies receiving as much as £7.5 billion in unjustified profits.

“SGN’s voluntary contribution is welcome. Other energy network companies must now look to do the same for consumers, while Ofgem should make sure this money is returned to consumers as soon as possible.”

Author: Tom Grimwood,
Channel: Operations & Assets , Policy & Regulation , Finance & investment

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