Ofgem reduces National Grid’s spending allowances for its transmission price controls

24 Feb 2017 03:22 PM

Ofgem has confirmed it will reduce National Grid’s spending allowances in its current price controls for running the high voltage electricity grid and high pressure gas main by £185 million.

In May last year we launched a mid-period review of the 2013 to 2021 energy transmission price controls. In August we announced a consultation on our minded to decision to reduce National Grid’s spending allowances by £185 million.

The final changes in allowances are as follows:

• A reduction in National Grid’s allowances for the high pressure gas pipeline price control by £168.8 million. This is because the Avonmouth gas pipelines it planned to build are no longer needed. 
• A reduction in National Grid’s allowances for the high voltage electricity grid price control by £38.1 million. This is because less fault protection works are needed due to fewer generators connecting to the high voltage grid. This has not affected the reliability of the high voltage network.
• An additional £21.5 million for system operation. The electricity system is going through major changes as we move to a low carbon economy. So National Grid (as system operator) has a bigger role to play. This includes providing additional supply and demand balancing services. 

Changes to National Grid’s revenue will take effect from April 2018. 

Ofgem has also opened a consultation on making further changes to the price control allowances of transmission and gas distribution companies. This includes proposals to reduce National Grid Gas Distribution’s allowances by £54m. This reflects that some work on its medium pressure gas mains will not be delivered in this price control period.

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