By Mark Williamson
SCOTLAND’s power giants will learn today if the regulator has agreed to their demands to dilute price control proposals which they have warned could choke off investment in support of the drive to cut carbon emissions.
Ofgem will announce the outcome of a consultation into proposals to limit the returns power firms can generate on their investment in networks, which provoked a furore when they were announced in July.
It said then the price controls proposed for the next five year period would nearly halve network companies’ allowed rate of return, to around four per cent.
The regulator also raised questions about a range of the projects proposed by energy firms.
Ofgem chief executive Jonathan Brearley claimed the body was striking a fair deal for consumers, “cutting returns to the network companies to an unprecedented low level while making room for around £25 billion of investment needed to drive a clean, green and resilient recovery”.
He said the controls would mean less of the money generated by power firms would go towards shareholders while more would go into improving the network to power the economy and to fight climate change.
However, the proposals were denounced by energy giants.
They claimed Ofgem’s approach could have a disastrous impact on the investment in networks that will be required to support the switch to renewable energy sources.
Scottish Hydroelectric owner SSE said Ofgem’s draft determination was a barrier towards achieving net zero and damaging to the green economic recovery.
ScottishPower warned Ofgem’s action could put at risk at the creation of hundreds of much-needed new jobs in Scotland.
Mr Brearley has said Ofgem’s stable and predictable regulatory regime will continue to attract the investment Britain needed to support decarbonisation.
International giants have continued to invest in big windfarm developments that SSE is leading on.
Last week Italy’s Eni acquired a 10 per cent stake in the Dogger Bank development in the North Sea from SSE for £202 million.
This is set to become the world’s biggest offshore windfarm. Norway’s Equinor has a 50% stake in Dogger Bank and will operate the windfarm.
In November SSE and Equinor secured £5 billion debt funding to support work on Dogger Bank from international financiers.
If energy firms are unhappy with what Ofgem announces today they could try to secure changes before the final price determination is ratified by the regulator.
SSE and ScottishPower have raised the prospect that an appeal against Ofgem’s final decision could be made to the Competition and Markets Authority.
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