National Grid is to share some of the excess revenues it generates from subsea electricity cables ahead of schedule, after striking a deal with Ofgem, the energy regulator.
Interconnectors – electrical cables that run under the sea and connect the UK to mainland Europe – allow European and UK generators to trade excess electricity, thereby enabling the import of cheaper energy from the continent.
Ofgem sets a maximum cap and minimum floor for the revenues interconnector licensees can earn over a 25-year period. But the grid operator will pay consumers £200m over the next two years after the regulator gave it the green light to make payments above the cap “significantly” earlier than planned.
National Grid said the move would “contribute to reducing consumer energy costs”, and that it was now working with Ofgem “to explore how to ensure the early payments can have the most impact for consumers”.
John Pettigrew, chief executive, said: “While National Grid’s impact on customer bills is relatively small, we strive every day to keep our costs as low as possible.
“That’s why we have requested this change to our standard regulatory process and are working with Ofgem to accelerate payments over the next two years to make a difference now.”
Jonathan Brearley, Ofgem chief executive, said: “This early payment ensures consumers get value for money sooner from our regulatory framework.
“We’re now working at pace to ensure this money is returned to the consumer in the fastest and most impactful way.”
Usually, revenues generated by interconnectors are compared against the maximum and minimum levels over a five-year period. Top up payments are made if they are lower than the floor, while the licensee pays revenues in excess of the cap to consumers. The balance is normally settled every five years.
