UK energy regulator Ofgem has released a new investment plan aimed at improving customer service and reducing carbon emissions from regional electricity networks up to 2010.

With a total investment of £6.5bn, the old electricity network will be upgraded and network companies will receive funding to cut carbon emissions, Ofgem said.

Companies will be paid incentives to deploy up to 10GW of low-carbon generators by 2014 and to minimise network losses at a cost of £4 a year per electricity bill.

The £6.5bn also includes £5.2bn of government money set aside for upgrades between the 2005-2010 period.

Ofgem has asked the companies to reduce their forecast investment plans by 17% and collectively cut their forecast operating costs by 10%, which would limit the impact on the customer by about £4 a year on annual household electricity bills.

Ofgem has warned it will penalise companies delivering poor customer service during this time and reward companies providing exceptional service.

The regulator is also planning a new £500m low-carbon network fund for large-scale trials of advanced technology and new commercial arrangements with customers.

Ofgem CEO Alistair Buchanan said the moves are all part of the transition to a low-carbon economy.

“The companies need to adapt to the needs of a low-carbon economy,” Buchanan said.

“Greater use of electric vehicles, home-grown generation and other developments will demand radical change in the way that networks are designed, managed and operated.”