Gas network investment proposed

03-12-2007

Gas network investment proposed
The UK's energy regulator has said the country's gas distribution networks will be allowed to invest billions of pounds replacing ageing gas mains.

Ofgem said the networks would be permitted to spend more than £5 billion on investment measures over the next five years, including £3.6 billion on replacing old infrastructure.

New price controls announced by the regulator will allow the UK's four gas distribution companies to spend an average of more than £1 billion a year on investment – representing a 36 per cent rise on expenditure permitted in the previous year.

As part of Ofgem's proposals, the companies will be authorised to spend £80 million on training and apprentices over the next five years in order to maintain a high level of skilled staff to carry out their operations.

New incentives have also been put forward to encourage gas distribution networks to cut greenhouse gas emissions and promote sustainable development, including by cutting upfront charges customers in fuel poor communities face if they want to get connected.

Meanwhile Ofgem said it also expected gas distribution networks to improve productivity and cut operating expenditure by 2.5 per cent a year, despite acknowledging the impact of above-inflation cost pressures on the industry.

Under the plans, household gas bills would increase by approximately £2 a
year in real terms.

If the plans are accepted by the gas distribution networks, the new price controls will come into effect from April 1st 2008.

Ofgem chief executive Alistair Buchanan said the proposals constituted a "fair deal" for both distribution companies and customers who would benefit from investment increases.

He added expenditure forecasts for the gas distribution firms had for the first time been reduced as a result of comparing the performance of separately owned networks.

"This has allowed us to get a better deal for customers by challenging the companies to deliver investment and operate the networks more efficiently," Mr Buchanan explained.

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