Gregor Alexander, finance director of Scottish and Southern, said: “You have to look at proposals of this kind as a package, and on that basis they represent an acceptable outcome. It is not, however, a package which is in keeping with the scale of the long-term investment challenges set out in Ofgem’s own Project Discovery analysis.

“Our priorities now are to retain our position as the most efficient electricity distributor in the country, delivering supplies of electricity customers can rely on, and to work with Ofgem to make sure that the right frameworks are in place to encourage the essential future investment in energy distribution and transmission networks.”

The move to accept the Ofgem proposals comes despite initial criticism from the utility that Ofgem was not allowing companies to earn a high enough rate of return on their investment.

The 4.7% pretax rate of return allowed by Ofgem on investments in local electricity networks was well below the 5.1% permitted for water utilities, SSE said.

Moody’s, the credit rating agency, said the lower than expected permitted rate of return might negatively affect the credit ratings of some UK electricity distribution companies.

The proposals also affect networks operated by the UK subsidiaries of Germany’s E.ON, Electricité de France and Spain’s Iberdrola, which owns ScottishPower.

douglas.hamilton@theherald.co.uk