Ofgem has announced an additional £28 billion to upgrade the UK’s energy infrastructure – but the average Brit’s household bills will increase.
The investment will spend some £17 billion on gas transmission and distribution networks in the next five years, with £10 billion more being allocated for high-voltage electricity networks.
But the move is set to increase household bills by more than was first expected.
Households will see the network charges on bills – which make up around a fifth of average annual energy costs – surge by £108 to £330 by 2031 to cover the cost of the extra investment.
The regulator said this will include £48 for gas networks and £60 for the electricity grid.
But Ofgem has insisted that bills would be even higher without the approved investment.
It added that with savings of around £80 taken into account, the net increase to bills is expected to be around £30, or £3 a month, with costs expected to fall in future years.
Jonathan Brearley, chief executive of Ofgem, said: ‘Ofgem will hold network companies accountable for delivering on time and on budget, and we make no apologies for the efficiency challenge we’re setting as the industry scales up investment.’
The Department for Energy Security and Net Zero stressed the Government was offering support with costs by cutting £150 off power bills next April.
Chancellor Rachel Reeves announced in last week’s Budget that she would do this by scrapping the Energy Company Obligation scheme introduced by the Tories in government.
Ofgem has been reviewing the plans put forward by energy network companies – electricity transmission owners, National Gas and gas distribution companies – reducing more than £4.5 billion.
The 80 new power projects the investment will help fund include boosting the grid’s capacity through new power lines, substations and other technologies, to handle the flow of electricity from new renewable sources.
With the energy price cap increase, how much will my bills go up this year?
Between January 1 and March 31 next year, the cap will rise by 0.2% across England, Scotland and Wales, Ofgem has said.
This will mean an increase of 28 pence to a typical household that pays for electricity or gas by direct debit.
If a household is on a default tariff, they will pay on average 27.69 pence per kilowatt hour (kWh).
Based on the average across the UK, the daily standing charge is 54.75 pence per day. This includes VAT at 5%.
If a household is on a default tariff and pays via direct debit, they will pay on average 5.93pence per kilowatt hour (kWh).
Based on the average across the UK, the daily standing charge is 35.09 pence per day. This includes VAT at 5%.
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