By Lauren Howells

Energy regulator Ofgem has announced price control proposals which would deliver savings to consumers of up to £25 a year off the average energy bill.

Proposals expected to result in significant savings for consumers

Ofgem says that its proposals for a new regulatory framework, which it is planning to implement from 2021, are expected to result in “lower returns for energy network companies and significant savings for consumers”.

The price control plans include a cost of equity range – how much the network companies pay their shareholders – of between 3% and 5%, the “lowest rate ever proposed for energy network price controls in Britain”.

It is estimated that the proposals could result in over £5 billion of savings for household consumers over 5 years, the equivalent of about £15 – £25 per year off household gas and electricity bills.

Consumers must be confident they continue to get good value for money

Jonathan Brearley, Ofgem’s senior partner for networks, said: “The energy sector is rapidly changing and consumers must be confident they continue to get good value for money for the services the networks deliver.

“Ofgem’s stable regulatory regime allows companies to attract investment from around the world on behalf of consumers in Great Britain at the lowest cost. We will capitalise on this by getting network companies to work harder to deliver better value for consumers in the next price controls. This will mean lower costs for consumers of £15 – £25 per year on bills and lower returns for companies.”

Ofgem has said that the cost of transporting a unit of electricity around Britain has dropped by 17% since the mid-1990s, under its existing price controls.

Price Control Proposals from Ofgem on Energy Companies

Proposals should prevent billions in excess profits

Citizens Advice described Ofgem’s plans as a “major step forward”.

Gillian Guy, Chief Executive of Citizens Advice, said:

“These proposals should prevent a repeat of the billions in excess profits energy network companies are making under the current price controls. This means better value for consumers and potentially lower bills.

“The outcome of this consultation will be the acid test for Ofgem. It’s crucial that the regulator holds its nerve and sees through these changes.

“Curbing the ability of energy network companies to make excessive profits, limiting the price control to five years, and ensuring a greater voice for consumers are all measures that should take us closer to a towards an energy market that genuinely works for consumers”.

Stakeholders have until 2 May to respond to proposals

According to the Guardian, the National Grid has said it will continue to work with Ofgem “to achieve the best outcomes for all stakeholders”.

Ofgem has given stakeholders until 2 May to respond to its proposals and says it will finalise the framework for setting the next price controls in summer of this year.