UK households struggling with soaring energy bills will benefit after the National Grid has agreed to pay £200m to customers generated by electricity cables to Europe.
An agreement with the monitoring agency Ofgem requires energy network operators to repay revenue from subsea cables connecting neighboring countries’ power systems over a five-year period in excess of the cap.
Now National Grid is returning funds from both submarine cables four years earlier and a year earlier to “reduce consumer rates” for UK customers.
Cables allow countries to trade and share excess power, such as power generated by wind and solar power plants, to minimize waste from renewables. National Grid can earn £226.8 million a year on three subsea cables under the cab.
The company’s cable revenue improved due to volatility in the energy market. Commodity prices fluctuated significantly due to gas shortages and uncertainty from the Ukraine war.
The National Grid operates several cables connecting the UK and Europe, including links to Belgium, France and Norway. An additional cable to Denmark, called the Viking Link, is due to open in 2024.
National Grid, which operates grids in England, Scotland and Wales, is investing more than £2 billion in interconnect capacity, which it says will strengthen the UK’s energy security by easing supply and demand peaks. The company hopes to have about 8 million households powered by cable by 2024.
National Grid CEO John Pettigrew said: Given how difficult the current rising overall energy costs are for people across the country, we want to play a role in helping reduce consumer bills.
‘This is why we requested these changes to our standard regulatory process and we are currently working with Ofgem to accelerate payments over the next two years to make a difference.”
Jonathan Brearley, CEO of Ofgem, said:
“We are now accelerating this money to get back to consumers in the fastest and most effective way.”
The early payment of additional income earned during the crisis comes amid heated debate over whether windfall taxes should be levied on energy companies that over-profit as a result of the crisis.
Tesco chairman John Allen said on Tuesday there were “overwhelming examples” of levying embezzlement taxes on energy companies to help families struggling with energy bills. Boris Johnson has so far avoided calls for a one-time levy.
Millions of households are facing a cost of living crisis, and energy costs are expected to reach £3,000 per year starting in October.