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National Grid set to receive £44b spend approval from Ofgem

July 16th 2012

National Grid, Britain’s largest energy distributor looks set to receive the go ahead from Ofgem, the energy regulator to spend up to £44bn under strict funding terms to help transform the UK’s energy infrastructure.

Grid is proposing to spend over £21bn on its electricity transmission network over the next eight years beginning in 2013 to connect new power plants across England and Wales; along with a £9bn spend on gas pipelines and £13.5bn on gas distribution networks.

Industry analysts are indicating that Ofgem will not allow National Grid to increase prices as much they may wish, under the “price control” regulation which governs the level of expenditure and rate of return. This comes after Grid indicated bills may see an increase of £15 to £20. There is also a likelihood that Grid may have to cut its dividend, raise capital or sell off assets to raise funding.

Grid has suggested that its preferred method of fundraising would be to sell off assets. Steve Holliday, National Grid chief executive is keen to please company investors after he faced criticism in 2010 in a £3.2bn rights issue where he was accused of misleading shareholders regarding the company’s cash reserves.