UK's Ofgem Proposes Slashing Returns for Local Power Networks by a Third

By Jaime Llinares Taboada

U.K. energy regulator Ofgem on Thursday proposed to lower allowed returns for electricity distribution networks for April 2023-March 2028.

Ofgem's working assumptions include setting the baseline return on equity at 4.4% CPIH, which is on average a third lower than under the current price control -- set at 7% if adjusted to a comparable basis.

The watchdog said this is to offset increased investment and make sure consumers pay a fair price. Taking together with other proposals, Ofgem estimates these changes will lower network charges on bills by around 9%, or around 2 billion pounds ($2.79 billion) over the whole five-year period.

"These financial arrangements will significantly cut investor returns to make sure consumers pay a fair price for energy whilst networks attract the investment they need to be safe and green," Ofgem's Chief Executive Jonathan Brearley said.

The regulator said the arrangements will boost investment in local power grids to support growth in electric cars, small scale renewables, storage and cleaner forms of heating.

Write to Jaime Llinares Taboada at jaime.llinares@wsj.com; @JaimeLlinaresT

(END) Dow Jones Newswires

March 11, 2021 03:15 ET (08:15 GMT)

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