National Grid expects to increase its spending on the upgrade of Britain's power network by two thirds, or £2 billion a year, within three years, its chief executive said on Thursday.

Steve Holliday said the company, which operates Britain's high-voltage electricity transmission and gas distribution networks, was already planning to spend about £3 billion a year between now and 2012, reinforcing the grid and tying in new power stations and wind farms. “When you look out beyond 2012 it would be very easy to add £1 billion or £2 billion a year to that [figure],” he said.

The increases, which will be funded by consumers through their energy bills, are necessary if the vast wind farms and nuclear power stations that Britain needs if it is to cut carbon dioxide emissions are to be built. Mr Holliday said: “There is going to be a need for a substantial increase from 2012 onwards to build a modern 21st century grid.”

He added that caps on National Grid's spending programme would probably be loosened from that date.

Ofgem, the industry regulator, is examining new rules that will allow utilities to charge customers more to fund an overhaul of Britain's ageing power grid.

Mr Holliday was speaking as National Grid unveiled a 3 per cent fall in full-year profits to £1.77 billion, largely because of restructuring costs. The group increased its final dividend by 8 per cent to 35.64p.

Mr Holliday said that much of Britain's power grid dated back to the 1950s and 60s. He said that the Government's plans for construction of vast wind farms in remote parts of the UK would also require new high-voltage power lines connecting them with population centres.

He said that Ofgem had recently given approval for Grid to spend £10 million on detailed design work for the scheme, which should be completed by 2015.

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