Infrastructure investment will push up energy bills

17 July 2012

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17 July 2012 | Kamalpreet Badasha

The proposed £22 billion investment in gas and electricity networks announced by regulator Ofgem yesterday will push up corporate energy bills.

Eddie Proffitt, chairman of the gas and carbon groups for the Major Energy Users' Council told SM: “The price increases won’t impact on commodity prices but will increase transmission charges.”

Transmission charges refer to the first level of energy creation, transporting high-voltage electricity and high-pressure gas from the source of supply to a distribution company. In an average electricity bill the transmission charge makes up 5 per cent of the total bill and in a gas bill it accounts for around 2 per cent.

The upgrade and renewal of the electricity network will cost about £15 billion with a further £7 billion needed to ensure the gas networks remain safe and reliable.

“The capital investment for electricity will treble but for gas it will be less. Electricity is the focus for new investment as green issues have to be paid for. Investment is needed for wind farms, which are going to cost significant amounts of money. There is also going to be a cable from Glasgow to the Wirral, which alone will cost £1 billion,“ added Proffitt.

The investment will see consumer bills increase by an estimated £7 in 2012 rising to £15 in 2021, according to Ofgem. But the infrastructure upgrade could create about 7,000 jobs in the construction supply chain.

The investment would also increase the security of gas and electricity supply in the UK as identified in Ofgem’s ‘project discovery’ that analysed the area.

“As Ofgem’s project discovery set out, Britain faces an unprecedented need to invest, to replace ageing infrastructure, meet environmental targets and deliver secure supplies. This needs to be carried out at a time of global financial uncertainty, which makes attracting investment difficult but possible,” said Ofgem chairman Lord Mogg.

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