Ofgem, the energy watchdog, began a sweeping investigation yesterday into the way that the gas and electricity networks are regulated in the UK.

The two-year review is designed to spur greater investment in the new pipes and wires needed to support a huge planned expansion of offshore wind, nuclear power and gas storage.

But critics gave warning that it ultimately could lead to further upward pressure on prices paid by consumers. As part of the study, Ofgem said that it would consider tearing up a 20-year-old system of price caps governing investment in the UK’s power and gas network.

Alistair Buchanan, the chief executive of the regulator, said that the present regime, whereby every five years network operators, such as National Grid, negotiate with Ofgem a set amount that they can charge their customers for network improvements, had helped to ensure efficiency and drive down costs, but that it now needed to be reexamined against a background of big changes to the energy industry.

Billions of pounds will be required over the next decade to build high-voltage lines connecting vast offshore and onshore wind farms, often in remote locations, and new nuclear plants with areas of high energy demand. More will be needed to build greater gas storage capacity to permit more imports from overseas as supplies from the North Sea run out.

“We need to know if the regime can continue to promote innovation from the companies at the level that is required for the future,” Mr Buchanan said, noting it was possible that the review could lead to no change.

Paul Golby, the chief executive of E.ON UK, one of the country’s big six suppliers, said: “Certainly we need a regulatory regime that encourages and supports new investment.”

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