Regulatory watchdogs have come under fire for approving a £28 billion agreement with energy companies, leading to an anticipated yearly increase of nearly £110 in customer bills.
Ofgem, the industry regulator, has granted permission for companies to enhance and invest in their electricity and gas networks over the next five years.
These firms are permitted to recover the investment costs from customers, starting with a £40 addition to bills in April of the following year, with the amount rising to £108 annually by 2031. However, these figures do not yet consider the anticipated cost savings from such substantial investments. Ofgem estimates that, factoring in these savings, the actual increase per customer in 2031 will be closer to £30.
The agreed upon amount is £4 billion higher than Ofgem’s earlier proposal from this year, following pressure from industry advocates. Ofgem argues that this investment will help reduce the UK’s dependency on imported energy and eventually lead to cost savings for households.
Citizens Advice has criticized the recent deal, pointing out that network companies have already benefited from £4 billion in excess profits over the past four years. Gillian Cooper, the energy director, stated that energy bills are expected to rise by approximately £40 starting in April 2026, with further increases in the future.
Simon Francis, coordinator of the End Fuel Poverty Coalition, cautioned that Ofgem is taking a risk by potentially granting excessive funds to network and transmission companies. He emphasized the importance of thorough scrutiny and consumer protection to ensure the proper use of these substantial sums.
Greenpeace UK’s senior climate advisor, Charlie Kronick, emphasized the need for energy costs to decrease as the transition to cleaner energy sources progresses. He urged the government to intervene to ensure that the energy system prioritizes consumers over profits.
Dale Vince, founder of Ecotricity, suggested that disconnecting wholesale gas prices from electricity prices is key to reducing energy bills. He criticized Ofgem’s claims that increasing renewable energy on the grid, supported by these bill increases, would lead to lower costs, stating that breaking this link is essential to insulate against volatile global gas prices.
On the other hand, Andy Prendergast, national secretary of the GMB union, welcomed the overdue investment in gas and electricity infrastructure, highlighting its potential to enhance energy independence and commending the government for making significant decisions in this regard.
The investment will predominantly focus on companies that own power lines, cables, and gas pipes, rather than energy suppliers. Of the total £28 billion, nearly £18 billion is earmarked for gas transmission and distribution networks, with an additional £10.3 billion allocated for enhancing the high-voltage electricity network in the UK.
Households can expect to see network charges on their bills, which constitute about a fifth of average annual energy costs, increase by £108 by 2031 to cover the added investment costs, higher than the £104 rise initially estimated in July.
Jonathan Brearley, Ofgem’s chief executive, emphasized that the investment will support the transition to new energy forms and industrial growth, aiming to insulate against volatile gas prices and bolster the energy sector.
A government spokesperson highlighted the necessity of upgrading gas and electricity networks after years of insufficient investment to ensure energy security and stable supply.
Dhara Vyas, chief executive of Energy UK trade body, stressed the importance of increasing infrastructure investment to maintain safe, secure, and reliable energy networks capable of meeting future demands. The significant expansion of the electricity grid, the largest since the 1960s, underscores the need for modernization and increased capacity to accommodate growing energy needs.
Ofgem has been scrutinizing energy companies’ proposals since the beginning of the year, making reductions of over £4.5 billion compared to the initial £33 billion plans submitted. However, the final approved amount was increased from the July draft verdict due to appeals from network companies citing the necessity of additional electricity transmission development and infrastructure maintenance.
Ofgem stated that the investment will support 80 new power projects, including enhancing the grid’s capacity through new power infrastructure to accommodate electricity from new renewable sources.
Scottish and Southern Electricity Networks, a subsidiary of SSE, emphasized that the investment will decrease reliance on imported energy, enhance energy security, and act as a catalyst for economic growth, job creation, and supply chain