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Ofgem cuts £200m from electricity distribution network company allowances

Staff Writer | September 15, 2017
Ofgem has confirmed that the allowances of some of Britain’s electricity distribution network operators (DNOs) will be reduced by around £200m in total following a review of performance in their previous price control (2010-2015).
Britain   The reduction in allowances
The review assessed how much the DNOs had spent over the price control and what outputs they had delivered.

The reduction in allowances of £200m will result in lower network charges on energy bills during the current RIIO (Revenue=incentives+innovation+outputs) electricity distribution price control (2015-2023).

Electricity demand was significantly lower than expected in the 2010-2015 price control and some DNOs did not need to spend as much as expected on reinforcing their grids.

Ofgem has therefore reduced allowances by a total of around £74 million across some of the distribution networks of Western Power Distribution (WPD) Scottish Power, UK Power Networks (UKPN) and SSE.

Some DNOs also cancelled a number of major investment projects (individual schemes worth £15 million or more), and have spent less than expected on others where they found better ways to complete the work.

This has led Ofgem to reduce allowances by a total of around £130 million across WPD’s East Midlands network and two of UKPN’s networks.