Households in Great Britain struggling with soaring energy bills are to benefit after National Grid agreed to bring forward a £200m payment to customers generated from its electricity cables to Europe.
Under an agreement with the watchdog Ofgem the energy network operator must pay back revenues made from subsea cables – which connect the electricity systems of neighbouring countries – over a five-year period above a cap.
Now National Grid will return the funds gained from two undersea cables four years early – and from another a year early – in order to “reduce consumer bills” for customers.
The cables enable excess power, such as that generated from wind and solar farms, to be traded and shared between countries, meaning the waste from renewable energy is minimised. National Grid is allowed to earn £226.8m a year from three of the subsea cables under the cap.
The company’s revenues from the cables have improved because of volatility in the energy market. Uncertainty caused by gas shortages and the war in Ukraine have led to significant swings in commodity prices.
National Grid operates several cables connecting Britain to Europe, including links to Belgium, France and Norway. A further cable to Denmark – called the Viking Link – is due to open in 2024.
National Grid, which operates the electricity network in England, Scotland and Wales, is investing more than £2bn in interconnector capacity, which it said would increase energy security by smoothing peaks in supply and demand. By 2024, the company hopes about 8m homes can be powered by the cables.
Its chief executive, John Pettigrew, said: “While National Grid’s impact on customer bills is relatively small, we strive every day to keep our costs as low as possible. Given how challenging the current rise in overall energy costs is for people across the country, we want to play our part in helping reduce consumer bills.
“That’s why we have requested this change to our standard regulatory process and are working with Ofgem to accelerate payments over the next two years to make a difference now.”
Ofgem’s chief executive, Jonathan Brearley, said: “This early payment of £200m ensures consumers get value for money sooner from our regulatory framework. We’re now working at pace to ensure this money is returned to the consumer in the fastest and most impactful way.”
The early payment of extra revenues raked in during the crisis comes amid a fierce debate over whether a windfall tax should be imposed on energy firms making outsized profits as a result of the crisis.
The chair of Tesco, John Allan, said on Tuesday there was an “overwhelming case” for a windfall tax on energy companies to help households struggling with energy bills. Boris Johnson has so far shunned calls for the one-off levy.
Millions of households face a cost of living crisis, with annual energy bills forecast to hit as much as £3,000 on average from October.
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Separately, lawyers are trying to recoup hundreds of millions of pounds for energy customers who lost out because of the dealings of several cable sellers.
They have filed a collective action hoping to prove that households overpaid for their energy. In 2014 the European Commission found that several companies which sold high voltage and underwater electricity cables between 1999 and 2009 had been running a nearly worldwide cartel. It meant energy companies in Britain overpaid for their cables and the costs were ultimately passed on to customers.
The case will be taken to the competition appeal tribunal. Anyone who has been a bill-payer in Britain since 2001 is eligible to be included in the suit, which is being run by lawyers from Scott + Scott.