Medium-term investment

In the medium-term, our investment in the network is managed in conjunction with the Office of Gas and Electrical Markets (Ofgem), which determines how much new investment is required in each five-year 'price control review period'. The current five-year period began in April 2005, and will see a substantial increase in investment. Like many other UK electricity distribution companies, much of our network is 40- to 50-years-old and will need to be replaced before it starts to cause significant problems. Our investment allowance this time round (£1.2 billion) will help us maintain and improve the service we give to customers.

This will include

• New rural and urban remote control schemes to restore supplies as quickly as possible
• Automatic circuit breakers to limit the number of customers who experience faults
• Putting select sections of cable underground to reduce the number of faults
• Re-configuring 'rogue' circuits to reduce the number of customers experiencing faults, so allowing supplies to be restored more quickly.

Ofgem has also introduced a separate funding mechanism that will allow companies to use some of their allowable expenditure to put overhead cables underground in Areas of Outstanding Natural Beauty and National Parks. We intend to use this allowance fully and we are in discussions with local environmental groups about how and where to do this.

Long-term investment

Long-term investment in the network involves managing the entire lifecycle of all our assets. In practice, this means we are always looking not just years, but decades, ahead and developing proposals to address the risks we might face and the potential for long-term improvements and upgrades. All this is done on a rolling basis and reviewed against current performance levels. Furthermore, if emerging technologies such as micro-combined heat and power (CHP) and other low-carbon forms of generation are to flourish, there will need to be substantial new investment in the network to ensure that it is able to cope with the changes in the nature of electricity generation and supply that these new technologies will bring.

In April 2005, Ofgem introduced the Registered Power Zone (RPZ), an initiative which provides a financial incentive to distribution companies to develop and implement innovative projects connecting distributed generation to networks where this may not have otherwise been economically feasible. Central Networks has developed such a project on the east coast of the UK which has become the UK's first RPZ. The system developed uses an automated control system capable of analysing the network and sending signals to distributed generators connected to it. This controls output in a way that best uses the existing network and avoids the installation of costly new infrastructure. We hope eventually to share data from the project with other network operators across the UK and potentially help address the challenge of connecting distributed generation to the distribution network, so helping meet the Government's renewable power targets.