Ofgem has altered the cap and floor prices for the UK’s new interconnector with Norway after the developer reduced its construction costs.

The cap – which limits the revenues the operator can charge for use of the cable – will be reduced from £140 million to £94m.

The floor – the minimum amount the operator will receive in revenues – has been reduced from £75m to £53m.

Any top-up payments needed to bring the operator’s revenues up to the floor price will be charged onto customers’ electricity bills, while any excess revenues generated above the cap will be returned to consumers through reduced bills.

Encouraging investment

Dermot Nolan, Ofgem’s Chief Executive, said: “Greater interconnection is good for Great Britain’s security of supply as we can import from a wider, deeper and cheaper pool of electricity available in neighbouring countries.

“Ofgem’s cap and floor regime, which regulates interconnector revenues, is one of the reasons why so many new projects are being proposed, as it encourages this investment.

“More interconnection also enables access to wider market areas and diverse market participants, which is good for competition.”

> See Ofgem's statement