Bills to rise after Ofgem U-turn

MORE pressure was put on household power bills today, after regulator Ofgem said it will permit electricity companies running the wires and substations to charge more.

Ofgem is allowing electricity distribution companies to charge 1.3% more next year, a substantial U-turn from the summer when its first thoughts on price caps for the next five years was that companies should be forced to cut their prices by 2%.

The power regulator said it had changed its mind because more money is needed to invest in ageing electricity networks.

'We have produced a package of measures that strikes the right balance between attracting investment and ensuring that customer prices are no higher than they need to be,' said Ofgem chairman Sir John Mogg.

Electricity distribution accounts for up to 30% of the average household bill, and Ofgem said its final ruling meant bills purely to meet the costs of running the infrastructure will be rising on average by 6p per month.

Household power bills have been surging by more than 10% because of the rising cost of wholesale electricity.

London distribution prices are to be cut by 2.4%, something likely to anger EDF, the State-owned French company that runs the capital's networks and which has been demanding more money for investment. EDF, however, won sizeable changes on its price caps for the networks it runs in the South-East and East Anglia.

Of the quoted companies affected, United Utilities, which runs networks in the North-West has been given a significant respite. From Ofgem demands of a price cut in the summer it has won rises of 8%.

Its shares advanced 1 ½p to 563½p, though investors are still wary of the outcome of the Ofwat price regulation on United's North West Water later this week.