Investing for the future
What does 28p buy you nowadays? How about 47p a day?
You probably said ‘not a lot’ but that’s what we charge our customers each day to keep the lights on in our network areas in southern central England and the north of Scotland respectively. It’s slightly higher in Scotland because of its terrain.
As today is results day, I thought I would explain how we make our money. The Networks business has been under the political and media microscope, and I welcome this attention because it allows us to tell our story.
We are a highly regulated, low risk, low return business: Ofgem agrees the return we can make on the amount we invest in the transmission and distribution networks that take electricity from where it’s made to where it’s used.
Between next year and 2023, we are proposing to invest as much as £3.6bn in our distribution networks in the north of Scotland and central southern England. On top of an improved service we are also proposing a 15% cut in our part of your electricity bill. And we are committed to injecting £4bn to £5bn into our transmission network in Scotland.
The regulator allows us to make a return of around 4 pence for every pound we invest in the UK’s energy infrastructure. But through efficient use of resources we lower our costs and can achieve a return of around 5 pence in every pound. These efficiency savings are then shared with customers and also invested back into the electricity infrastructure.
Relative to the scale of the investments being made, these are not excessive profits. It’s in this context that we have today reported an operating profit of £955.4m for the year. To put it simply – if we don’t efficiently invest, we don’t make money.
The increased scrutiny often overlooks what we are doing for our customers. We ensure that everyone has reliable power in their homes and businesses. Over the past ten years we have been replacing and upgrading towers, cables and substations that were once part of the post-war reconstruction boom. These first-generation assets need to be replaced.
Cast your mind back ten years and count the number of electrical appliances and devices in your home then, and compare that with now. The number of mobile phones, for instance, is about to exceed the number of people in the world. In an era of increased demand, extreme weather events and changing customer needs, we must meet the challenges of not just today but also tomorrow. We connected 300MW of generating capacity to the transmission network this year and 1.5GW the preceding decade.
We are constantly reducing the number of faults across our networks, which are over 99% reliable, and the amount of time customers are sometimes left without power. We ensure that rural and urban communities that we serve have a safe, reliable, and secure source of energy, and that we have a programme of assistance for vulnerable customers should they need our help. And we are helping to lower greenhouse gas emissions by connecting low-carbon electricity to our transmission networks.
Twenty eight pence or 47 pence a day is less than the cost of a daily newspaper. To me that’s a story worth telling.