National Grid chief warns of blackouts in dispute over profits curb
THE BOSS of National Grid has attacked the energy watchdog over its plans to curb how much the network is allowed to make in profits and to invest, warning that the UK could experience blackouts as a result.
John Pettigrew, chief executive of National Grid, said Ofgem’s draft determinations were “unacceptable”. A battle is brewing between the regulator and energy companies after Ofgem said it would halve the profits they are permitted to make in order to save money for consumers, shaving £20 a year off the average household bill.
The proposals – part of Ofgem’s latest five-year plan for the industry – have sparked claims that companies will be so squeezed there will be no money left for investment in infrastructure. “They will increase the risk profile of our networks, they will jeopardise the UK’s transition to net zero, and with the low returns on offer, they will dampen incentives and innovation, and limit our ability to help the green recovery,” Mr Pettigrew said.
Under Ofgem’s proposals, it would take more than 100 years to replace important electricity network assets, National Grid executives said yesterday, while the risk of power outages on the electricity network will rise by 24pc. Because Ofgem has cut companies’ permitted profits, it has also had to reduce the amount of this money which must be spent on investment.
Firms have been told to plough £25bn in upgrading power networks, and £10bn into measures to cut carbon emissions – much less than the industry expected. National Grid had said in its business plan that it would invest almost £10bn over the five-year period.
But instead, Ofgem refused to allow more than 50pc of the company’s proposed electricity network investment and around 40pc of its proposed gas network investment. The amount that the Grid can invest in electricity network reliability has been cut by an “unprecedented” 80pc, leading to fears that rolling power cuts could plague Britain. However, Ofgem said: “Strong evidence from water regulation and Ofgem’s offshore transmission regime shows that investors will accept lower returns and continue to invest.”