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. . . as Ofgem tells generators to slash spending

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ELECTRICITY REGULATOR Ofgem said this week that it wanted power generators to slash proposed capital expenditure increases by £800M, despite fears about the stability of the power grid.

The call for budget cuts came as Ofgem opened negotiations with electricity distribution companies on price limits for 2005-2010.

Britain's 14 distribution network operators (DNOs) want to increase capital expenditure over the next five years by 42% from £4.1bn to £5.8bn.

But Ofgem has proposed an overall increase of just 33% to £5bn.

Earlier this year MPs warned Ofgem that spending on electricity infrastructure was inadequate and was compromising the long term stability of power networks, increasing the risk of power cuts (NCE 18 March).

Ofgem said it was aware that capital expenditure must increase to boost replacement of network assets. But it said the amounts proposed by the generators were unjustifiable.

Initial spending proposals, based on a report by consultant PB Power, were released on Monday.

Electricity companies must respond by 9 August and final spending plans are set by Ofgem in November. Price changes take effect from April 2005.

Worst hit is EDF energy which wants a 90% - £500M - increase in investment to replace assets and ensuring long-term supply security. The regulator says it needs to spend around half this amount.

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