Households face higher energy bills after network companies were given the green light to spend £28bn on Great Britain’s gas and electricity grids.
The energy watchdog, Ofgem, approved more than £17.8bn of spending plans to upgrade gas transmission and distribution networks in the five years from April 2026.
A further £10.3bn will be used to rewire the nation’s high-voltage electricity network – the biggest expansion of the grid since the 1960s.
The multibillion-pound plans are higher than the £24bn budget proposed by the regulator in the summer and represent initial spending as part of a wider “investment pipeline” into new projects and upgrades over the next five years, which could cost an estimated £90bn if approved.
The plans will fund more than 80 projects, including new high-voltage power cables, and upgrades to existing overhead wires, ahead of the government’s plan to become a green energy superpower by the end of the decade.
Ofgem approved investment proposals from energy companies including National Grid, SSE and Scottish Power.
The projects will be funded through levies on household energy bills. They are expected to add £108 a year to network charges on bills by 2031, taking those charges from £222 to £330 a year, according to Ofgem, more than the £104 originally estimated in July.
Within the increase, £48 will support upgrades to the gas network and £60 will be invested in the electricity grid.
The final annual total could be even higher, at £338 a year, because Ofgem plans to smooth the rises by backloading the increases in cost.
It said the investment would save £80 from bills compared with not expanding the grid, because savings would be made from cutting funds spent paying windfarms to shut down when the local grid is overloaded with power.
Overall, the added net costs are “equivalent to bills being higher by about £30 a year by 2031, or around £2.50 per month”.
Ofgem has been reviewing the plans put forward by energy network companies – electricity transmission owners, National Gas and gas distribution firms – since the start of the year and has cut more than £4.5bn compared with the initial £33bn plans submitted.
Ofgem’s chief executive, Jonathan Brearley, said: “The funding announced today will keep Britain’s energy network among the safest, most secure and resilient in the world.
“Ofgem will hold network companies accountable for delivering on time and on budget … We’ve built strong consumer protections into these contracts, meaning funds will only be released when needed and clawed back if not used. Households and businesses must get value for money, and we will ensure they do.”
The Ofgem price cap will increase by 0.2% in the three months to March, equivalent to increasing the typical annual dual-fuel energy bill by £3 to £1,758.
The chancellor, Rachel Reeves, said last week that the government would cut £154 from energy bills in Great Britain on average from April as a result of the ending of the energy company obligation scheme, which is funded through bills, and a decrease in the amount that households contribute to the renewables obligation scheme. Energy suppliers have been urged to ensure the savings are passed on to households.
The Department for Energy Security and Net Zero (DESNZ) said spending to improve energy networks was essential and stressed the government was offering support with costs by cutting £150 off next year’s power bills from April.
A DESNZ spokesperson said: “Upgrading our gas and electricity networks after years of underinvestment is essential to keep the lights on and ensure energy security for our country.”
The shadow energy secretary, Claire Coutinho, criticised the energy secretary, Ed Miliband. “Now hard-working families across the country will see their energy bills soar to pay for installing hundreds of miles of cables and pylons to connect all of Ed’s wind farms to the grid,” she said.
Scottish and Southern Electricity Networks, which is owned by SSE, said: “The investment it delivers will help reduce reliance on imported energy from overseas, remove grid bottlenecks and strengthen energy security.”
National Grid, which runs much of Britain’s electricity network, said it welcomed Ofgem’s “recognition of the need for significant investment into the electricity transmission sector” and would review whether the approved package “delivers an overall framework that is both investable and workable”.
Greenpeace said upgrades to the network were “vital” but called on Ofgem to make sure they delivered “genuine value for money”, while the End Fuel Poverty Coalition said “these vast sums of essentially public money must come with proper scrutiny and guarantees for consumers”.
Network charges for smaller businesses will also rise. Ofgem estimated increases of about £60 a year by 2031 for a small holiday let or retail kiosk, £1,700 for small offices or hotels and £9,760 for a medium-sized factory.
