Scottish Power
Ofgem has introduced new measures to save customers £12 a year (Reuters)

Energy watchdog Ofgem has set out new price controls for the industry which will save customers an average of £12 a year.

Ofgem said the savings are being made from the distribution part of the energy bill, which accounts for 8% of an annual dual fuel bill, and will come into effect for the eight-year period between April 2015 and 2023.

The bill reductions come thanks to £2.1bn of savings the regulator secured from five of the big six energy providers, which in turn result from a £17bn upgrade of the UK's local electricity network.

The energy suppliers concerned are: UK Power Networks, SP Energy Networks, SSE Power Distribution, Northern Power Grid and Electricity North West.

Energy firms had set out measures towards the end of 2013 after the regulator asked them to review their business plans. However, Ofgem felt that these plans didn't go far enough and "failed to deliver good enough value".

In that instance only Western Power Distribution's price control plan was deemed to be of sufficient value to customers by Ofgem.

"Today's announcement is all part of Ofgem's consistent drive to get the best deal for consumers while maintaining a stable regulatory regime which attracts investment as cheaply as possible," said Ofgem chief executive Dermot Nolan.

"Our approach has delivered over £80bn of investment since 1990 which has seen reliability increase and power cuts fall by 30%. At the same time, total network costs are 17% below where they were 25 years ago and electricity distribution costs are 39% lower," he said.

Ofgem has also challenged the companies to improve their customer service, highlighting that they should be doing whatever they can to help vulnerable customers.