Li’s electricity firm faces fine for UK connection failures

Billionaire investor Li Ka-shing is facing a threatened penalty at his UK electricity distributor after the energy regulator on Monday said the sector was failing customers.

Ofgem today told the UK’s six electricity distribution operators it could cut their revenues by £13.9 million this year after finding they may have failed customers requiring new connections.

The distributors serve businesses and housebuilders who request to be hooked up for electricity, with Ofgem saying it was “one of the most important services” they provide.

UK Power Networks, owned by Li’s CK Infrastructure fund and made up of three distributors, would face a revenue penalty £4.62 million in total if Ofgem goes through with the plan.

The company is one of six operators, alongside Electricity North West, Northern Powergrid, Western Power Distribution, SP Energy Networks and Scottish and Southern Electricity Networks.

Ofgem's penalties are based on a percentage of revenues allowed and is fixed rather than being based on the severity of the service breach.

Ofgem said many of the failings at the operators involved “poor communications”, adding some customers found it hard to get progress updates on their connection requests or the information provided was not detailed enough.

However, Ofgem said the operators “seem to be improving their engagement and services” despite some issues remaining.

Ofgem introduced incentives for the distributors to improve their services, known as an Incentive on Connections Engagements.

The operators have to prove they are given a good level of service as part of the ICE. Ofgem said a consultation on performance show the operators “may have fallen short” on their service. The operators have until September 18 to reply.

The Energy Networks Association, which represents the power networks, said Monday's announcement showed the operators were "broadly improving engagement and services for connecting customers".

"DNOs will review these provisional findings and provide evidence on improved performance," it said, pledging to work with Ofgem.

UK Power Networks, which is made up of London, South-east and East operators, was snapped up by Li in £5.8 billion in 2010 from EDF.

It provides electricity networks for essential transport systems like the London Underground, Heathrow and Stansted airport and the Docklands Light Railway.

Li is worth an estimated $34 billion and owns UK assets including Northumbrian Water.