Energy: Profits
The question
To ask the Secretary of State for Energy Security and Net Zero, if he will make an assessment of the potential implications for his policies of the report by Citizens Advice entitled Debt to society: what the network companies should do with their windfall profits, published on 20 February 2025.
Answered by Michael Shanks
Ofgem recognised that recent higher than expected inflation increased equity value for network companies due to fixed-rate debt financing. In 2023, Ofgem consulted on options to address this and will change the way it regulates network company investment, deliverables and returns, to ensure this issue does not occur in the future. Ofgem considered reclaiming previous excess profits but decided against this to avoid raising the cost of capital and costs for consumers. Ofgem has made clear that it expects network companies to use any inflation benefit to accelerate network upgrades and find additional ways to support consumers struggling with bills.
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