Electricity networks told to help cut customers' bills

Five of the six firms which operate the networks, through which suppliers deliver electricity, have had their business plans thrown out by Ofgem. They've been told they must submit new ones in next March (see our Energy Tips guide to cut bills).

Costs from the electricity networks account for nearly 20% of electricity bills. These are monopolies, so customers rely on regulators to get them a good price.

Western Power Distribution, which serves customers in south Wales, the Midlands and the south west of England, is the only company to have its price controls agreed early.

It plans to invest £3 billion on upgrading its network from 2015 to 2023. These proposals should reduce customer bills by an average of 11.6% over the eight years, although this will vary between each region.

Customers in the East Midlands, for example, will be paying £5.50 less on their electricity bills, based on 2012/13 prices, while there will be an average £18.80 reduction for those in the south west of England (join our free Cheap Energy Club to find the best tariff for you).

Hannah Nixon, Ofgem's senior partner for distribution, says: "We understand that energy costs are a big concern for consumers and we set a high target for demonstrating value for money.

"We are pleased that nearly all companies have pledged to cut bills, but we feel that most companies can go further in cutting their costs and expect to see further improvements when they resubmit their plans in March."

What are energy networks?

The energy industry in the UK has three different parts: generators, network operators and retailers.

The generators produce energy, which is then distributed by network operators and sold by retailers, which include the big six energy providers.

There are 14 distribution networks in Britain, serving different areas of the country. They are owned by six different firms.

Scottish and Southern Energy, SP Energy Networks, Electricity North West, Northern Powergrid and UK Power Networks all had their business proposals rejected.

Ofgem will make a final decision on their plans in November 2014.