Electricity customers have overpaid for seven years, says watchdog

CUSTOMERS HAVE been paying too much for their electricity for seven years because regulator Ofgem set the bar too low for networks, the spending watchdog has said.

The National Audit Office (NAO) said that although customer service has been good, Ofgem made targets too easy for network companies and over-estimated the returns needed to bring investment to the sector.

This has pushed up electricity bills for British households and businesses over the past seven years.

The NAO did not specify how much more households had paid, but just one aspect of the price control has cost an estimated £800m too much.

Current rules, known as RIIO1, give networks an allowance to run and invest in their systems.

If they spend less they can keep half of the savings and return half to customers.

During the full eight years of RIIO-1 the distribution networks expect to underspend by three per cent on average.

One company, National Grid Energy Transmission, forecasts a 22 per cent underspend. Only one business will overspend its allowance.

The RIIO-1 price controls were introduced in 2013.

Akshay Kaul, Ofgem’s director of network price controls, said: “Our tough new round of price controls will lower returns to save consumers money, whilst pushing companies to go further on decarbonisation.”#

The NAO said that the extra time of RIIO-1 had locked customers into paying higher bills for longer.

Gareth Davies, the head of the NAO, said: “Ofgem’s regulation of electricity networks has delivered good service performance but higher than necessary costs for consumers.”

Gas and electricity networks have been heavily regulated since they started to be privatised in the late 1980s.