Electricity distribution network operators (DNOs) will have £200 million less to spend in the next Revenue=incentives+innovation+outputs (RIIO) period after Ofgem confirmed cuts to their allowances.

The regulator said electricity demand during the RIIO period from 2010 to 2015 had been lower than expected and so DNOs spent less than expected reinforcing their grids.

This has allowed the watchdog to cut the allowances for the 2015-2023 RIIO period by £74m across some of the power lines operated by Western Power Distribution (WPD) Scottish Power, UK Power Networks (UKPN) and SSE.

The allowances for WPD’s East Midlands network and two of UKPN’s networks have been reduced by £130m after DNOs spent less on capital projects during the previous RIIO period.

‘Lower returns’ for DNOs

Jonathan Brearley, Ofgem’s Senior Partner for Networks, said: “We have already told network companies that they should prepare for tougher price controls from 2021, with lower returns.”

Brearley added that other measures taken by Ofgem had already saved consumers £4.5 billion.

He predicted lower network charges for customers on their energy bills.

> Read Ofgem's decision