The U.K. arm of Electricite de France SA (EDF.FR) became Wednesday the second utility to accept gas and electricity market regulator Ofgem's proposed rules on how much companies can invest in local electricity distribution networks from 2010 to 2015.
Its acceptance comes despite initial criticism from the industry that Ofgem was not allowing companies to earn a high enough rate of return on investment. The 4.7% pretax rate of return allowed by Ofgem on investments in local electricity networks was well below the 5.1% permitted by the regulator for water utilities.
EDF Energy said it is developing plans to improve operational efficiency at its networks in order to maintain shareholder value despite the lower rate of return.
EDF plans to sell its U.K. electricity distribution network, with bids expected earlier next year and a final sale by March.
Among potential buyers are U.K. utility Scottish and Southern Energy PLC (SSE.LN) in partnership with Canada's Borealis Infrastructure Management Inc. Canada Pension Plan and U.K. gas and electricity network operator National Grid PLC (NGG) are also potential bidders.
Ofgem's proposals affect networks operated by Scottish and Southern Energy, which has already accepted the decision, and the U.K. subsidiaries of Germany's E.ON AG (EOAN.XE) and Spain's Iberdrola SA (IBE.MC), who have yet to respond.