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Ofgem cuts the cost to customers under new network price controls (RIIO-2)

Ofgem confirms network price control methodology so consumers can benefit from a cheaper, smarter and more sustainable energy network

The Ofgem-regulated price control determines the allowed revenue for network companies. The next price control period of 8 years, known as RIIO-2, will start from 2021. 

At the end of May 2019, Ofgem confirmed its methodology for calculating the next round of network price controls. The new price controls are designed to deliver a smarter and more sustainable energy network that will now come at a lower cost to consumers.

Ofgem said "In essence, we are basically reducing the amount of money firms can earn for transporting electricity and gas to your home."

The new methodology, if applied, will create the lowest-ever capital rate for energy network companies. These lower permitted returns on equity are expected to reduce costs passed on to consumers by £6 billion over the five years (about £30 a year for domestic consumers, and more for non-domestic depending on consumption).

Final savings will depend on a number of other factors; Ofgem is set to make a decision on operational expenditure allowances next year after network companies have submitted their business plans for approval.

More information on this can be found here.