Power firm Northern Powergrid Holdings is bracing itself for an 18% fall in revenues within its North East subsidiary as a result of Ofgem rules.
The group – parent company to electricity managers Northern Powergrid North East (NPg Northeast) and Northern Powergrid Yorkshire (NPg Yorkshire), engineering contractors IUS, hydrocarbon permit business CE Resorces and Northern Powergrid Metering Ltd – has published accounts showing a 13% rise in sales to £817.6m in 2014.
In this financial year, however, the group predicts a dip in revenues as result of Ofgem pricing proposals, which follow criticism from the Competition and Markets Authority (CMA) suggesting households are overpaying.
Northern Powergrid is among firms recently granted permission to appeal against the regulator’s ruling on price controls for electricity suppliers, rulings which also require power network operators to spend £17bn to upgrade and maintain the UK’s electricity network.
A report accompanying the accounts states the appeal should conclude in the last quarter of 2015.
In the meantime, the report says: “Under Ofgem proposals NPg Northeast’s base allowed revenue will decrease by approximately 18% and NPg Yorkshire’s by 12% in the regulatory year to March 31 2016, before the addition of inflation, as measured by the Retail Prices Index, in order to derive the final price change.”
The accounts show operating profit for the group rose 13.4% in 2014, from £366m to £415.6m, and employee numbers also rose, from 2,413 to 2,518.
The group’s core service of providing and maintaining the distribution network saw it invest £450.4m to improve the network over the year – a record amount which topped the previous year’s record spend of £441.7m.
A new Field Operations structure was also brought in last year, tailoring its services and responses to customers through new operating zones covering main conurbations, including Tyne and Wear, industrialised areas and rural areas.
During the year, Northern Powergrid Northeast also worked in partnership with British Gas, Durham University, Newcastle University and EA technology on its major project under Ofgem’s Low Carbon Networks Fund, known as the Customer-Led Network Revolution.
The group, which will incur expenditure of £31m on the project, said: “The project assessed the potential for new network technology and flexible customer response to facilitate speedier and more economical take-up by customers of low-carbon technologies, and the connection to the distribution network of increasing amounts of low-carbon or renewable energy generation.
“The scale of the project’s output was such that Ofgem agreed to extend the project to four years in order to ensure that the quality of learning delivered is relevant.”
Separate accounts for Northern Powergrid North East, which serves 1.6m customers, showed revenues rose by £48.6m to £359.5m, while operating profit went up by £30.8m to £171.4m.
Within NPg North East, which employs 1,082 people, an interim dividend of £30m was paid out and directors recommend that no final dividend is paid.
The highest paid director at NPg North East received £517,000 in 2014 – an £18,000 pay hike compared to the year before.
The group report added: “The directors intend that Northern Powergrid will continue to develop its business by operating that business with the goal of efficiently investing in the network and improving the quality of supply and service provided to customers.