More power to the people

£5bn payout cut for energy shareholders

ENERGY giants have been ordered to knock £5billion off bills by cutting shareholder payouts.

Industry regulator Ofgem yesterday announced a clampdown on 14 monopoly firms that distribute gas and electricity around Britain.

But the move won’t kick in for another three years.

And critics said the average saving for customers – £15 to £25 a year – could be wiped out by a predicted wave of price rises.

Network costs add around £250 to the average annual £1,100 dual-fuel bill.

That helps pay for investment but also feeds through to how much network operators have available to give shareholders.

Ofgem currently sets the rate of return in eight-year cycles.

It is proposing to reduce the amount they dish out, and cut the timeframe to five years. Ofgem says it will save households more than £5bn between 2021 and 2026.

Jonathan Brearley, Ofgem’s senior partner for networks, said: “Consumers must be confident they continue to get good value for money.” Gillian Guy, chief executive of Citizens Advice, called the changes “a major step forward”.

She added: “These proposals should prevent a repeat of the billions in excess profits energy network companies are making.”

But Victoria Arrington, from the switching website Energyhelpline, said: “The 2021 date might seem far away for some customers.

“Over the coming weeks, we fear a wave of price rises from the Bix Six energy providers.

“Even just a 2% price rise is equivalent to £22 per year.”

The clampdown did not concern the network operators’ investors yesterday. Shares in industry heavyweight National Grid jumped 2.8%.

National Grid handed shareholders more than £1.4bn in dividends last year as profits jumped 16% to £2.8bn.