TIDM71ZU TIDM43WX

RNS Number : 6012X

OFGEM

27 November 2017

27 November 2017

Ofgem welcomes SGN's contribution to consumers

Ofgem has welcomed the voluntary contribution to consumers from SGN the gas network company that operates across Scotland and the south of England.

Jonathan Brearley, Ofgem's senior partner for networks, said: "Network companies require a licence to operate, not just from the regulator, but from their own customers who must be confident they are getting good value for money.

"We are signalling again today that energy network companies need to prepare themselves for a tougher round of price controls from 2021 with lower overall returns."

During the current price control Ofgem has secured additional savings of over GBP4.5 billion for consumers by a combination of reduced revenues or voluntary contributions from companies.

SGN, a consortium which includes SSE, has committed to make a voluntary contribution of GBP145 million in price control allowance terms to consumers.

Under Ofgem's price control sharing mechanism* this will result in GBP84 million being returned to customers.

National Grid, Cadent and Scottish and Southern Electricity Networks, the electricity networks division of SSE, have already agreed to make voluntary contributions to consumers.

In total, voluntary commitments made by network companies so far will result in more than GBP650 million being returned to consumers.

Ofgem encourages the remaining gas distribution and electricity transmission companies to follow suit.

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Notes to editors

1. SGN's statement on its voluntary contribution is here As part of the contribution, SGN is carrying out additional work totalling around GBP30 million to benefit customers by enhancing the resilience of its network, and to assist fuel poor households. The company will fund the majority of this spending.

2. Ofgem sets price controls for the monopoly companies that run Britain's gas and electricity networks. Gas distribution and energy transmission companies are now more than halfway through their 2013-2021 price controls. *The price controls include a sharing mechanism which splits any under and overspends of price control allowances between the companies and consumers.

3. Forecast returns for gas distribution and energy transmission companies in the 2013-2021 controls are all at the higher end of expectations, partly due to significant improvements in efficiency. Customers share the benefits of efficiency savings in the form of lower charges which have helped to reduce network costs by 6 per cent since 2013 under Ofgem's Revenue=Incentives+ Innovation+Outputs (RIIO) price controls.

4. In July, Ofgem signalled that network companies need to prepare themselves for a tougher round of price controls from 2021.

5. On 28 March National Grid agreed to voluntarily defer allowances from its electricity transmission price control. In current prices this means that National Grid is deferring around GBP589 million in allowances. The sharing mechanism results in around GBP332 million of this being returned to customers. In addition, National Grid has voluntarily pledged GBP150 million to a programme to fund heating systems in fuel poor households that are not connected to the main gas grids).

6. On 8 November, SSE announced that Scottish and Southern Electricity Networks had agreed to make a voluntary contribution of GBP65.1 million in allowance reductions. Around GBP39 million of this will be returned to consumers through the price control sharing mechanism.

Further information

For media, contact:

Chris Lock: 0207 901 7225

Media out of hours mobile: 07766 511470 (media calls only)

For investors, contact:

Martin Young: 0207 901 7114

About Ofgem

Ofgem is the independent energy regulator for Great Britain. Its priority is to make a positive difference for consumers by promoting competition in the energy markets and regulating networks.

For facts, figures and information about Ofgem's work, see Energy facts and figures or visit the Ofgem Data Portal.

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Follow us on Twitter @ofgem, LinkedIn and Facebook.

This information is provided by RNS

The company news service from the London Stock Exchange

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November 27, 2017 05:58 ET (10:58 GMT)

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