British energy regulator proposes package to boost grid capacity

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Electricity pylons are seen in Wellingborough, Britain, March 30, 2022. REUTERS/Andrew Boyers/File Photo

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June 29 (Reuters) - Britain's energy regulator proposed a spending package of 20.9 billion pounds ($25.5 billion) on Wednesday, including 2.7 billion pounds in upfront funding, as part of an initial five-year plan for sustainable and affordable regional energy grids.

The regulator, Ofgem, said the plan would boost capacity of the regional grids, which distribute electricity from long-distance transmission networks to industrial, commercial and domestic users.

It would also reinforce their resilience, preventing power outages, and improve customer service, it said.

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Laying out the plan for 2023 to 2028, it said most customers could see a small drop in costs related to network charges. The plan includes price controls that set the revenue that each of Britain's 14 distribution network operators can earn.

The regulator proposes to reduce the companies' allowance for the cost of their equity to 4.75%. This figure affects the profit they are allowed to make.For the current period, ending next year, it is 6% to 6.4%.

"We're determined to get the best possible deal for consumers and the proposals we've published today will mean that substantial additional investment can be made to deliver net zero (carbon emissions) without placing any further pressure on bills," Ofgem chief executive Jonathan Brearly said.

The average customer currently paid around 100 pounds ($122) per year to operate, maintain and reinforce regional grids, the regulator said.

Ofgem will hold consultations on the proposed plan until August 25, with a final decision to be confirmed in December.

National Grid (NG.L), which owns several of the companies covered by the plan, said it was working through the detail of Ofgem's proposal, particularly a proposed reduction in the allowance of total expenditure by each operating company.

Ofgem said its proposal set a total expenditure allowance of about 20.9 billion pounds, 17% less than requested by the companies.

Ofgem's initial determination is "tough and stretching", SSE (SSE.L), another owner of electricity distribution companies, said in a statement, adding it would now take time to review the details and engage constructively with the regulator.

($1 = 0.8204 pounds)

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Reporting by Yadarisa Shabong and Radhika Anilkumar in Bengaluru and Nora Buli in Oslo; editing by Jason Neely and Bradley Perrett

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