The decision by watchdogs to approve a £28 billion deal for energy giants has sparked criticism due to the potential impact on customer bills, with an estimated increase of nearly £110 per year.
Ofgem, the industry regulator, has given the green light for companies to invest in upgrading their electricity and gas networks over the next five years. This move allows the firms to recover the investment costs from customers, starting with a £40 increase on bills from next April, which is projected to rise to £108 annually by 2031. However, Ofgem suggests that after factoring in the anticipated savings from these investments, the actual increase in 2031 per customer is expected to be closer to £30.
The approved deal exceeds Ofgem’s initial proposal by £4 billion following industry lobbying efforts. Ofgem argues that the investment will help reduce the UK’s reliance on imported energy and eventually lead to savings for households.
Citizens Advice raised concerns over the deal, noting that network companies have accumulated £4 billion in windfall profits over the past four years. Gillian Cooper, the director of energy at Citizens Advice, stated that energy bills are likely to rise by around £40 starting from April 2026, with further increases anticipated in the future.
Various stakeholders have expressed mixed opinions on the decision. Simon Francis, coordinator of the End Fuel Poverty Coalition, cautioned that Ofgem could be giving network and transmission companies a “blank cheque” with these investments, emphasizing the need for transparency and consumer protection. Greenpeace UK’s senior climate advisor, Charlie Kronick, emphasized the importance of ensuring that energy costs decrease as the transition to cleaner energy sources progresses.
Dale Vince, founder of Ecotricity, highlighted the need to decouple wholesale gas prices from electricity prices to lower energy bills. He criticized the current system where network operators make significant profits, invest inadequately, and then raise bills to fund investments, calling for a more logical approach to energy regulation.
On the other hand, Andy Prendergast, national secretary of the GMB union, welcomed the investment in gas and electricity grids, emphasizing the importance of moving towards energy independence.
The allocated funds will primarily go towards upgrading gas transmission and distribution networks, with a substantial portion also dedicated to enhancing the high-voltage electricity network in the UK. As a result, network charges on bills, which account for approximately a fifth of annual energy costs, are expected to increase by £108 by 2031.
Jonathan Brearley, Ofgem’s chief executive, stated that the investment aims to support the transition to new energy forms and industrial growth while safeguarding against volatile gas prices. The government echoed the importance of upgrading energy networks to ensure energy security.
Dhara Vyas, chief executive of Energy UK, emphasized the necessity of increasing infrastructure investment to maintain a reliable energy network that can meet future demands. Ofgem has reviewed and reduced the proposed investment plans from energy companies, aiming to strike a balance between necessary funding and cost control.
Overall, the investment is set to support new power projects that will enhance the grid’s capacity to accommodate electricity from renewable sources, contributing to the UK’s energy transition and security.
Various energy companies, including Scottish and Southern Electricity Networks and National Grid, have welcomed the investment as a step towards reducing energy imports, strengthening energy security, and driving economic growth.
As the energy sector undergoes significant transformations, stakeholders stress the importance of ensuring that investments lead to tangible benefits for consumers in terms of cost efficiency, energy security, and sustainability.