Ofgem cuts returns from local electricity networks

The UK energy regulator said it would boost investment in local electricity grids to power electric cars, small-scale renewables, storage and cleaner forms of heating. Surface transport and domestic heating account for 34% of the UK's greenhouse gas emissions.

Under the new price control regime shareholders' return on equity from local electricity networks will be a maximum of 4.4% - a third lower than the previous price control. Ofgem said it had set the rates of return consistent with the average for EU regulators to keep the UK as an attractive investment.

Jonathan Brearley, Ofgem's chief executive, said: "We're driving local electricity networks to help make sure that every watt of energy produced from plant to plug is better used, for example by ramping up their use of battery storage, saving bills and the planet.

"At the same time, these financial arrangements will significantly cut investor returns to make sure consumers pay a fair price for energy whilst networks attract the investment they need to be safe and green."

Shares of National Grid, which operates the electricity network in England and Wales, fell 0.7% to 835.6p at 10:26 GMT.