(Adds detail, context)
LONDON, July 4 (Reuters) - British gas distribution business Cadent has agreed to refund 54 million pounds ($70 million) of price control allowances to regulator Ofgem because the company will no longer be making some investments in its central London gas network.
Cadent, formerly National Grid Gas Distribution, owns the gas distribution networks in north London, central England, the east of England and northwest England. It was renamed in May following the sale by National Grid of the majority stake in its gas distribution business to a consortium.
Ofgem sets price controls for Britain’s energy network companies. The controls set the amount of money that can be earned by the companies that operate Britain’s network operators over a set period of time. The firms recover their allowed revenues by charging suppliers, which in turn pass on the costs to customers.
The price controls run until 2021 and aim to encourage the network companies to spend money on upgrading and maintaining Britain’s electricity network.
Ofgem said on Tuesday it had decided to reduce Cadent’s allowances by 54 million pounds. This is in addition to a 185 million pound reduction in National Grid’s allowances which has already been announced.
“As part of today’s decision Ofgem has also decided to delay the allowances that National Grid and Scottish Power will receive for building the Western HVDC link, a subsea electricity cable linking Hunterston in Scotland with Deeside in North Wales,” it said in a statement.
“This is because the completion of the cable has been delayed until 2017-18 due to cable manufacturing problems,” it added.
$1 = 0.7721 pounds Reporting by Nina Chestney; Editing by Mark Potter