11 Conclusion to Part 2
115. Electricity
distribution companies need sufficient revenue to replace ageing
infrastructure, maintain the network adequately, and invest in
improved quality of service and in the new construction needed
to accommodate renewable generation. We are increasingly confident
that Ofgem will address all these requirements in its approach
to the price control process. Although Ofgem has not gone as far
or as fast as we would wish in terms of capital expenditure allowances,
the regulator's proposals for the 2005-10 period still represent
a marked improvement — and, given a history of previous
under-investment by companies, we understand Ofgem's caution.
It is for the companies in the forthcoming price control period
to prove that they can use their capital expenditure allowances
effectively.
116. We are less
happy about the continued regulatory pressure on operational expenditure.
While there may still be efficiencies to be gained by the companies,
we fear that the DNOs may have to make real cuts in the amount
and quality of maintenance of their networks if such pressure
continues. We recognise that consumers are unhappy about recent
increases in electricity bills, which stemmed from rises in generating
costs; but we are aware that, in several recent major incidents,
power cuts were caused either directly or in a contributory way
by maintenance problems. We believe that customers would be willing
to pay a little extra to reduce the incidence of such power cuts.
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