Greg Clark has urged Ofgem to impose a “much tougher regime” on distribution network operators’ (DNOs) prices.
The Business, Energy and Industrial Strategy (BEIS) secretary of state told back bench MP John Penrose in the House of Commons yesterday (30 January) he agreed the energy regulator should be a “great deal tougher” with the DNOs in the future.
During BEIS question time in the Commons, Penrose said: “Energy distribution network operators charge obscenely high prices on our energy bills and make absurdly large profits for running safe, low-risk monopoly businesses that get energy to our homes.
“Ofgem has been far too soft on these firms for ages, allowing them to get fat and lazy at customers’ expense.”
Describing Penrose’s comments as “absolutely right”, Clark said: “In the next price control period, Ofgem should have a much tougher regime.”
Welcoming decisions by SGN, SSE and National Grid to refund what he branded “excess returns” to consumers, Clark urged the other DNOs to follow suit.
Clark’s comments follow an increasing focus on network operators as drivers of high fuel bills over recent months.
Professor Dieter Helm’s review of energy costs for the government, which was published last November, identified networks as a key driver of increased energy prices.
He said the price controls in the RIIO regulatory framework have been too generous for the DNOs, enabling these companies to secure returns that retail energy suppliers would envy.
And earlier this month, the Energy and Climate Intelligence Unit estimated that network operators profits added £20 to the typical customer’s bills.
Responding to concerns raised by her shadow Alan Whitehead about “shortcomings and omissions” in the Clean Growth Strategy, energy and climate change minister Claire Perry said the government aimed to “do more”, particularly on business energy efficiency and new homes standards.
Perry also said the government continued to “look closely” at whether to give the go ahead for the Swansea Bay tidal lagoon project, which was recommended for approval by former energy minister Charles Hendry in a government commissioned report submitted more than a year ago.