UK Regulator Proposes to Cut Returns for Power Distribution Companies

By Jaime Llinares Taboada

The U.K. energy regulator on Wednesday proposed lower return allowances for electricity distribution companies for the 2023-2028 regulatory period known as RIIO-ED2.

Ofgem has published its draft determinations for the five-year cycle starting April 1 that sets the amount of money that can be earned by the distribution network operators. The regulator has proposed a total expenditure package of 20.94 billion pounds ($25.52 billion) to be split across the six companies: Electricity North West Ltd., UK Power Networks, Western Power Distribution, Northern Powergrid, SP Energy Networks and Scottish and Southern Electricity Networks.

Ofgem is also proposing a baseline return on equity allowance of 4.75% and a weighted average cost of capital allowance of 3.26% for most companies.

"Ofgem is...proposing tough efficiency targets for the networks along with a sharp reduction in their allowed rate of return, meaning less of consumers' money goes to company profits," the regulator said, adding that most consumers could see a small drop in network charges.

The energy watchdog said this plan will also boost grid capacity, improve customer service and resilience to prevent outages, and prepare the way for more greener energy generation.

Write to Jaime Llinares Taboada at [e-mail]; @JaimeLlinaresT

(END) Dow Jones Newswires

June 29, 2022 02:59 ET (06:59 GMT)

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