Energy Bills 'To Rise' As Network Upgrades Loom

The energy regulator is proposing that household bills rise by up to £15 annually over the next eight years to pay for investment in gas and electricity infrastructure.

The move is subject to consultation but Ofgem argued it would help ensure the power network remains among the most reliable in the world.

National Grid (LSE: NG.L - news) has been told it can provisionally spend £17bn to connect new power plants across England and Wales and install gas pipelines.

The regulator said another £5bn would be acceptable if the company needed it.

It is understood National Grid wanted a greater sum but Ofgem was anxious not to impose too high a burden on consumers.

The work, which includes laying undersea cables and maintaining gas mains, will result in average household bills rising by £7 next year and by up to £15 by 2021 under Ofgem's plans - but National Grid said they fell short of what was needed.

A spokesman said: "While the information currently available is limited, we believe that these initial proposals will not appropriately incentivise the essential investments necessary to provide safe, reliable networks for the UK consumer and avoid delays to the achievement of the UK's environmental targets."

It added that the packages proposed do not adequately reflect the increased scale of investment and implicit risk associated with such major investments.

Ofgem chairman Lord Mogg said: "Britain faces an unprecedented need to invest to replace ageing infrastructure, meet environmental targets and deliver secure supplies.

"This needs to be carried out at a time of global financial uncertainty, which makes attracting investment difficult but possible."