Blackout Risk to Rise on New U.K. Investment Plan, Grid Says

(Bloomberg) --

National Grid Plc warned of an increased risk of blackouts in Britain if regulator Ofgem goes ahead with planned changes to the investment framework for energy network companies.

The company that operates the backbone of the nation’s transmission network said that without investment in maintaining and upgrading critical national infrastructure it will degrade much quicker and put security of supply at risk.

Under Ofgem’s proposals, it would take over 100 years to replace important electricity network assets, increasing the risk of power outages particularly during severe weather events, National Grid said in a statement Monday.

“In bad weather it could mean that overhead lines aren’t resilient and will struggle to stay in place - that’s a real worry,” Nicola Shaw, executive director for the U.K. at National Grid, said in an interview.

Regulator Ofgem proposed new price controls in July that set out a record low rate of return on equity for investors and cut more than 8 billion pounds ($10.5 billion) from companies’ spending plans by disallowing costs that they have not justified as delivering value for money for consumers.

“There are places with particular assets that need investment,” Shaw said. “Ofgem has declined to let us spend money needed to replace the asset to protect the long term health of the network.”

Net Zero

Network companies say that the U.K.’s 2050 net zero target is at risk if Ofgem doesn’t allow grids to innovate and adapt to cope with millions of electric vehicles or heat pumps being connected to the system.

Read more about the network companies’ response here

Regulated industries like energy networks and water have come under scrutiny for allowing investors to recoup a high level of return at the expense of the bill payers.

“Where network companies have demonstrated they need vital funding to repair or maintain the system, we have given them the go-ahead,” an Ofgem spokesman said. “In many cases, companies have simply failed to give us the evidence they need more funding. We will not green-light spending billions of consumers’ money on poor or unnecessary proposals.”

Ofgem’s consultation closed on Friday and a final decision will be published in December.

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