The UK competition regulator has backed a move by Ofgem, the government energy governing body, to slash returns for investors in monopoly energy networks in Britain, despite appeals from companies including National Grid, ScottishPower, SSE and Cadent.
The Competition and Markets Authority said on Wednesday that it would uphold the energy regulator’s decision to cut returns for investors in companies that owned critical gas and electricity infrastructure almost 40 per cent from April this year, the main point of contention.
However, the CMA ruled in favour of the companies in certain technical areas regarding what they could charge consumers.
All of the energy networks affected by the regime, which was finalised by Ofgem in December and runs until 2026, had appealed to the CMA on various grounds.
Ofgem chief executive Jonathan Brearley welcomed the CMA’s provisional ruling as an “important first step” towards the regulator’s goal of “keeping bills as low as possible for customers while supporting investment to net zero greenhouse gas emissions”. A final ruling is expected before the end of October.
“We will continue to engage with the CMA to finalise these price controls, and look forward to working with the industry to deliver efficient investment which will benefit both consumers and the planet,” Brearley added.
Ofgem and energy networks have been locked in a bitter battle since last year over the returns that can be made by companies that own Britain’s national electricity and gas infrastructure, as well as local gas networks.
The regulator took an axe to returns following complaints from consumer groups, in particular Citizens Advice, that the monopolies had been allowed to make “eye-watering” profits at the expense of households under a previous pricing regime in effect since 2013.
But the networks argued that a harsh crackdown would threaten their ability to deliver reliable services and ensure the energy system could cope with the changes required to meet the UK’s 2050 net-zero emissions target.
David Smith, chief executive at Energy Networks Association, which represents the companies that own electricity and gas infrastructure, said the group would “review in detail” the CMA’s provisional findings.
National Grid, which was among the nine companies to appeal, said it was “disappointed” the CMA had not found in favour of the networks on the issue of returns, although it welcomed the ruling on some of the more technical aspects of the new pricing regime. Its shares were trading 1.2 per cent lower early on Wednesday.
James Plunkett, executive director of Citizens Advice, said the CMA’s ruling was overall a “good result for consumers”.