"We have accepted the companies' investment plans but told them to deliver them at much lower cost," said Ofgem chief executive Alistair Buchanan.
He added: "We are demonstrating that our eye is on ensuring customers' needs are met without losing sight of the importance of value for money in difficult times."
Consumers currently spend £3.6 billion a year for energy distribution or one sixth of their total bill.
Last month energy and climate change secretary Ed Miliband said that Ofgem would be given greater powers to protect consumers and keep the cost of their energy bills as low as possible.
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