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Committees

Network Costs

Inquiry

Following the evidence session on Energy Prices on 29 October 2013, the Energy and Climate Change Committee will undertake an inquiry into energy network (transmission and distribution of gas and electricity) costs, as part of ongoing parliamentary scrutiny into energy prices, profits and poverty.

Network costs

Ofgem estimate that network costs currently make up around 23 per cent of a dual fuel (gas and electricity) bill. 20 per cent of the bill represents the cost of transporting gas and electricity on local power and gas mains (or distribution) networks. Three per cent of the bill is the cost of transporting gas and electricity through the high voltage grid and the national high pressure gas main (or transmission) network.

While network charges reduced by 50 per cent in the first 15 years after privatisation, they have been rising again as new networks are built to help connect low carbon energy, replace old gas mains and renew ageing parts of the network.

Both Ofgem and DECC have indicated that energy bills are likely to rise in the future as a result of increased network costs. Ofgem have stated, however, that network costs are expected to remain stable in real terms (i.e. excluding inflation) until at least the start of the next decade. Despite this, questions remain on how transparently current and future network costs are determined and how effective Ofgem is at monitoring and scrutinising the charges and profits of network companies. These are some of the issues, among other things, this inquiry will explore.