SGN to return £145m “unjustified profits” to customers

Scotia Gas Networks (SGN) has announced that it will voluntarily return £145m to customers after identifying excess profits from the most recent price control. Under Ofgem’s price control sharing mechanism this will result in £84 million being returned to customers.

The company said it had identified “forecast regulatory allowances for a range of projects and programmes across its Scotland and southern gas networks, which will either be no longer required or claimed… This voluntary contribution of £145m will not only benefit customers but help maintain the integrity of the RIIO regulatory framework.”

Citizens Advice’s chief executive, Gillian Guy, said: “We have been calling for this on the back of energy network companies receiving as much as £7.5bn in unjustified profits. SGN’s voluntary contribution is welcome. Other energy network companies must now look to do the same for consumers, while Ofgem should make sure this money is returned to consumers as soon as possible.”

Ofgem has welcomed the voluntary contribution, but repeated its warning that energy network companies should prepare for a “tougher” price control. Jonathan Brearley, the regulator’s senior partner for networks, said: “Network companies require a licence to operate, not just from the regulator, but from their own customers who must be confident they are getting good value for money. We are signalling again today that energy network companies need to prepare themselves for a tougher round of price controls from 2021 with lower overall returns.”

During the current price control Ofgem has secured additional savings of over £4.5 billion for consumers by a combination of reduced revenues or voluntary contributions from companies.

SGN, a consortium which includes SSE, has committed to make a voluntary contribution of £145 million in price control allowance terms to consumers. SGN is carrying out additional work totalling around £30 million to benefit customers by enhancing the resilience of its network, and to assist fuel poor households. The company will fund the majority of this spending.

National Grid, Cadent and Scottish and Southern Electricity Networks, the electricity networks division of SSE, have already agreed to make voluntary contributions to consumers.

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