Consumers could have to pay for new overseas power cables
CONSUMERS may have to foot the bill for new electricity cables connecting the UK to overseas, under proposals set out by regulator Ofgem yesterday.
Interconnectors allow electricity to flow from other countries, with the aim of ensuring security of supply. The UK currently has four of the cables, linked to France, Ireland, the Netherlands and Northern Ireland.
Under the current system, suppliers bid for electricity via a capacity auction, which guarantees the operators of interconnectors a steady stream of revenue.
But Ofgem says only a limited number of projects have come forward under this arrangement, so it is now shifting the burden on to consumers. Under the proposed cap and floor framework, Ofgem will control how much revenue the interconnector developers make. If it is too low, consumers will top up the difference and if it is too high the excess will be passed back.
“This turns the building of interconnectors into a semi-regulated business and is another move away from a market based system,” Peter Atherton, analyst at Liberum, told CityAM
But the government defended the new rules. “Being better connected with our nearest neighbours will strengthen our energy security and ultimately bring down bills,” said a spokesperson. “It’s unlikely that developers will have low revenues, reducing the risk for consumers.”