Energy bills could fall by £20 a year, but suppliers hit back

Energy companies criticise new plans to cut bills and invest in green energy

Household energy bills could fall by an average of £20 under plans from the energy watchdog to overhaul gas and electricity networks.

Ofgem wants firms to invest at least £25 billion over five years to improve energy supply to homes.

Some £3 billion of this would be earmarked for making the UK’s energy infrastructure more environmentally friendly.

A further £1 billion will be invested in energy research and reducing the networks’ impact on the environment.

Ordinarily energy companies would pass this cost on to its customers to ensure their profits.

But Ofgem says that suppliers must halve the returns they make on their investments in the energy network.

The proposals could save consumers more than £3.3 billion over the next five years, cutting the average household bill by around £20, Ofgem estimates.

Ofgem says the changes would create a “greener, fairer energy system for consumers".

Jonathan Brearley, Ofgem’s chief executive, says: “Now more than ever, we need to make sure that every pound on consumers’ bills goes further. Less of your money will go towards company shareholders, and more into improving the network to power the economy and to fight climate change.”

Energy experts have praised the plans.

Richard Neudegg, head of regulation at Uswitch.com, says: “The amount of profit that network companies have been allowed to make in recent years has been a matter of significant controversy, given our energy suppliers have to pass on these charges to our bills.

"There is still some way to go in Ofgem finalising these proposals, but these are a step in the right direction.”

Energy hit back against plans

Energy companies have criticised Ofgem's proposals and hinted they might try to overturn them.

Rob McDonald, managing director of transmission at SSE, says: “At present the draft settlement does not strike the right balance for all stakeholders, and without significant changes during the consultation period, there is a real risk that the critical investment in Britain’s electricity networks will be unnecessarily slowed down by an appeal process via the CMA, which is not in any stakeholders’ interests.”

Keith Anderson, chief executive at Scottish Power says: “Instead of investing more in creating green jobs and skilled apprenticeships in every community, at a time when the UK needs them most, this is a short-sighted return to austerity politics.

"Nobody benefits from this half-baked plan. It’s bad for jobs, bad for apprenticeships, bad for training and bad for the UK supply chain.”