Weekend press: New energy secretary’s baptism of fire

Our roundup of this weekend's news stories includes new energy secretary Claire Coutinho's first days in office; Utilita has launched an appeal against Ofgem; the prime minister looks set to reverse the ban on building onshore windfarms; and in Scotland environmental activists call out Scottish Water over coastal waters.

Energy supplier seeks to overturn new financial resilience rule

A leading British household energy supplier is seeking to overturn planned new rules aimed at boosting suppliers’ financial resilience following a series of collapses.

Utilita, which has about 800,000 customers, argues that regulator Ofgem’s planned capital buffer requirement will make “survival in the market difficult” for challenger suppliers and should be quashed.

It has asked the Competition and Markets Authority for permission to appeal against the rule in what will be a major test of the regulator’s efforts to reform the market.

The new requirement “puts fundamentally resilient supplier . . . in an unsustainable position, for minimal (if any) regulatory benefit”, the company said in papers submitted to the CMA and published last week.

Ofgem announced new financial resilience measures in July as part of its efforts to prevent a repeat of the collapses of 30 suppliers in late 2021 and early 2022 that followed a sharp rise in wholesale gas prices.

The market rout added £94 to every British household’s energy bills last year to cover the costs of rescuing customers from failed suppliers, and led to criticism of Ofgem for failing to regulate the market properly.

Under the changes due to come into force in March 2025, suppliers will be expected to hold a capital buffer of £115 per customer, known as the “capital target”.

If the company’s buffer falls below this threshold, it will have to submit a plan to the regulator setting out how it will recover, and it could be prevented from taking on new customers or paying dividends until it does so.

Utilita argued that it had “limited options” to raise extra finance to meet the capital target because general market challenges make equity investment difficult while the type of debt that meets Ofgem’s requirements “is very unlikely to be commercially available”.

Restricting companies’ ability to take on new customers or pay dividends if they fall below the threshold would make it even harder for them to raise the cash to recover,

Utilita said. The company added that the requirement put challengers such as Utilita at a disadvantage to rivals that are part of larger energy groups and have access to financial guarantees or loans from parent companies.

“The decision [on the capital target] will make survival in the market difficult for the very challenger entities which drive innovation,” it said.

Hampshire-based Utilita is majority owned by its founder and chief executive, Bill Bullen. Utilita argues it is a resilient company even without the new rules, as most of its customers are on pre-payment meters and it manages its exposure to wholesale prices surges.

“Utilita, and suppliers like it, (a) need less reserve capital to operate resiliently; but (b) cannot readily raise more capital than they need,” it said.

Ofgem has until September 7 to respond to Utilita’s application. The CMA is due to decide this month on whether to grant Utilita permission to appeal.

Financial Times

Claire Coutinho: Energy secretary faces ‘baptism of fire’ as reforms divide party

Claire Coutinho was retreating in the face of conflicting Conservative rebellions in her first day as energy secretary.

Rishi Sunak’s latest cabinet appointment was facing a “baptism of fire” as she was forced to give ground to both sides of the party’s civil war over net zero policies.

A moratorium on onshore wind farms was set to be dropped, with ministers fearing defeat at the hands of at least two dozen Tory rebels pushing to make it harder for local objections to stop turbines.

A ban on new oil boilers has also been watered down in response to anger from Conservatives who dubbed it a “rural Ulez”, in reference to the contentious London emissions zone. The government’s energy bill, which has its final Commons stages on Tuesday, has become the latest flashpoint over environmental policy, with Sunak and Coutinho being urged by net zero sceptics to scrap environmental measures, while pro-green Tories push for stronger green policies.

Sir Jacob Rees-Mogg, the former business secretary, urged Coutinho to drop the bill altogether, claiming that it imposed a “massive cost for the British economy” through measures such as a carbon capture and storage subsidy, hydrogen levies and energy efficiency rules.

“It is all about piling costs on the consumer in the headlong rush to net zero without thinking through the economic consequences,” he said.

Rees-Mogg has put forward an amendment with Craig Mackinlay of the Net Zero Scrutiny Group that would impose a duty on ministers to secure lower energy bills. “It changes the dynamic of the bill, giving a legal obligation for cheap energy rather than seeing it as for environmental purposes,” he said. “The priority should be showing energy is inexpensive.”

Other Conservatives, led by the former Cop26 president Alok Sharma, are putting forward an amendment that would end an effective ban on onshore wind that allows turbines to be halted by a single local objection.

Although Sunak promised such an amendment last year nothing has changed and backers, who include Liz Truss, are insisting that they will not be ignored again.

With opposition parties likely to back the amendment, ministers were last night offering written promises that they will alter planning rules, but rebels were holding out for changes to take effect immediately.

“The government committed to change planning rules by the end of April 2023 to overturn the de facto ban on onshore wind but this has not happened to date,” Sharma said.

Already ministers have given way to George Eustice, the former environment secretary, who warned about a planned 2026 ban on new oil boilers which would affect rural voters who are off the gas grid. Ministers have agreed to work on a government-backed scheme to convert such boilers to run on green fuels.

Alec Shelbrooke, a Tory MP who says that “the time has come to stop putting ideology above practicality” in achieving net zero, said that Coutinho, 38, was facing a “baptism of fire” on day one. “She’s got one of the toughest gigs you can have. It highlights totally split opinions [in the party],” he said.

The Times

Rishi Sunak ‘poised to revoke ban on onshore windfarms’ – report

Rishi Sunak is reportedly planning to revoke the ban on building new onshore windfarms in order to head off a row with Conservative MPs for the second time.

Ministers are preparing to introduce changes to planning rules that will allow councils to give the go-ahead to turbine proposals where there is broad public support, according to the Telegraph.

The amendment to scrap the ban on new offshore wind was put forward by the former Cop26 president Alok Sharma and has since drawn support from a group of Tories including Liz Truss, who are “confident” that it will pass.

Sharma said: “The government committed to change planning rules by the end of April 2023 to overturn the de facto ban on onshore wind, but this has not happened to date.

“This amendment therefore seeks merely to deliver on the government’s own promise and help to unlock investment in one of the cheapest forms of energy, and ultimately bring down household bills and improve the UK’s energy security.”

Labour also supports the proposal, meaning only six more Tory backbenchers would need to vote in favour to overturn the government’s majority.

The Telegraph said ministers had been locked in talks with MPs for almost a week over a compromise deal to avoid a bruising Commons defeat. Negotiations were set to continue on Monday, but plans were being drawn up for a minister to submit a statement to the Commons this week committing to change the existing planning rules.

Once the rebels in question have secured the necessary guarantees, they would drop their amendment.

Since 2015, an objection from a single resident can prevent a windfarm from being built. Councils can approve new sites only if they can show that local concerns have been “fully addressed”.

According to government sources, the changes would allow councils to “more flexibly address the planning impacts of onshore wind projects as identified by local communities” and allow farms to be built “when it has been demonstrated that the planning impacts have been satisfactorily addressed”.

The Guardian

Campaigners raise concerns over ‘cosy’ relationship between UK’s oil regulator and fossil fuel industry

Newly emerged meeting notes show that the UK’s North Sea Transition Authority (NSTA) has been assisting the fossil fuel industry in developing a pro-oil and gas message for continued North Sea drilling, raising concerns about the regulator’s impartiality in approving new projects.

Meeting notes have revealed how the UK’s independent oil and gas regulator is apparently helping the fossil fuel industry construct a new public “narrative” to “effectively make the case for continued North Sea oil and gas”.

The minutes were published on the website of the regulator, which is known as the North Sea Transition Authority (NSTA).

They detail the content of a North Sea Transition Steering group meeting on 9 May 2023 – a regular event currently co-chaired by NSTA chief Stuart Payne and Simon Roddy, who runs Shell UK’s North Sea business.

Executives from other fossil fuel companies and representatives from Offshore Energies UK, the industry lobby group, were also in attendance.

In a section headlined “Oil and Gas narrative” the minutes show that the group “would like to develop three to five key messages that are coherent and consistent, to effectively make the case for continued North Sea oil and gas”

Sky News

UK solar could be ‘dumping ground’ for products of Chinese forced labour, ministers warned

The UK risks becoming a dumping ground for the products of forced labour from Xinjiang province in China if it rejects reforms proposed by members of the foreign affairs select committee with cross-party support, ministers have been warned.

An amendment to the energy bill, due to be debated on Tuesday, would require solar energy companies to prove that their supply chains are free of slave labour. The Xinjiang region is the source of 35%-40% of the world’s solar-grade polysilicon, the key raw material in the solar photovoltaic supply chain.

The amendment to the energy bill has been tabled by Alicia Kearns, the chair of the foreign affairs select committee, seven other members of her committee and a host of other senior backbenchers.

It would require the Planning Inspectorate in England to ban any nationally significant infrastructure project over 50MW if it could not be proven beyond doubt that slave labour had not been involved.

The new confrontation between parliament and the executive comes days after the foreign secretary, James Cleverly, returned from Beijing insisting that he had put human rights at the centre of the bilateral relationship.

Kearns told the Guardian: “Cleverly talked the talk on the Uyghur genocide in Beijing. It’s time for the government to put its legislative might behind its strong rhetoric. By adopting this amendment to the energy bill, they can ensure that nationally significant infrastructure projects are far more transparent and become more free from forced labour.

“Taking even this small stand against all forms of slave labour would help put an end to the UK becoming a dumping ground for slave labour-produced solar. Uyghur blood labour must not stain our countryside.

“The fight against forced labour is a collective responsibility. Together, we must pave a path towards a clean energy transition, without becoming complicit in not just slavery, but genocide.”

A letter signed by 15 human rights groups in the Coalition to End Forced Labour in the Uyghur Region says forced labour is rife in Xinjiang and sets a high bar, arguing: “Due to systemic use of forced labour in the region, there is no valid means for companies to verify that any workplace in the Uyghur region is free of forced labour or to prevent the use of forced labour in the region in line with human rights due diligence.”

China and parts of the UK’s renewable industry will be furious if the UK backs legislation that its detractors say will lead to an effective ban on trade with the Uyghur region.

Cleverly last week ventured on the first trip to China by a UK foreign secretary in five years in a bid to put relations with Beijing on a better business footing. Cleverly insisted that he had raised human rights in all his meetings with officials.

But the cross-party determination by British MPs not to abandon the human rights agenda in China also creates a difficult backdrop for the subsequent visit by the investment minister, Lord Johnson, along with one of the largest British business delegations to a Chinese trade fair.

The Modern Slavery Act requires UK companies to report on what they are doing to free their supply chains from slave labour, but places no duty on them to do anything other than report.

The Coalition to End Forced Labour accepts that there has been some movement by solar companies to exit the Uyghur region in recent years, but says many firms are still operating there, especially with a view to supplying the UK market – where regulations are looser than in the US and EU.

The Guardian

Labour throwing Scots ‘under the bus’ without new energy rebate, claims SNP

Labour’s tax proposals will throw Scottish households “under the bus”, the SNP has said as it challenges its opponents to back energy rebates.

SNP MP David Linden, who is his party’s social justice spokesman at Westminster, has urged Labour to back the introduction of a wealth tax to fund an energy rebate if it wins the next election.

It would see the UK move in line with countries like France, Spain and Switzerland, which taxes people on their net worth rather than just their income.

Independent analysis by the House of Commons Library on behalf of the SNP found a £400 energy rebate for households from October 2023 to March 2024 would cost the UK Government around £11.9 billion, funded through the wealth tax.

The research bases the figure on the cost of the energy bill support scheme in 2022/23.

However, shadow chancellor Rachel Reeves previously ruled out the idea, saying: “I don’t have any spending plans that require us to raise £12 billion. So I don’t need a wealth tax.”

Mr Linden, the MP for Glasgow East, said the rebate is needed after projections suggested energy bills could increase again this winter, with Cornwall Insights estimating costs could hit £2,032.66 despite the Ofgem price cap reducing to £1,923 as of October.

He said: “Millions of families across Scotland are being hit hard in the pocket as a result of damaging Tory and Labour party policies, including Brexit and austerity cuts, which have hammered household incomes and increased the cost of living in the UK.

“It’s vital the UK Government delivers urgent help for families by reintroducing a £400 energy bill rebate for all households from October.

“Families are seeing their incomes squeezed to the pips as the cost of mortgages, rents and everyday goods rise, but Sunak and Starmer are doing nothing to help.

“It beggars belief that the pro-Brexit Labour Party is copying Tory cuts and refusing to help suffering families. You don’t beat the Tories by becoming them, but that’s exactly what Starmer and Reeves are doing.

“They are throwing millions of Scots under the bus for a sniff of power. It’s shameful.

“The SNP is the only party demanding real help for families – and delivering progressive policies like the Scottish Child Payment to put money back into people’s pockets. In contrast, the Tories and pro-Brexit Labour are taking money away and leaving families in the cold.

“At the general election, voting SNP is the only way to secure real change with independence and real help with the cost of living.”

A UK Government spokesman said: “We have been providing unprecedented support to families, with nearly £40 billion to cover around half a typical household’s energy bill last winter. Energy prices have fallen significantly since last autumn and the Energy Price Guarantee will remain in place as a safety net through to April 2024.

“Additional help is also available for the most vulnerable this winter through an increase to the Warm Home Discount, from which we expect over three million households to benefit, which is in addition to the significant welfare and income tax powers the Scottish Government has.

“Last month we also announced hundreds of new oil and gas licences to deliver cleaner homegrown energy for households – capitalising on Scotland’s energy resources while supporting 50,000 jobs.”

Independent

Protect our beaches from sewage debris, campaigners urge Scottish Water

Politicians are demanding tighter monitoring of sewage outflows after figures showed that Scotland’s beaches are blighted by eight times more sewage-related debris than those in England and Wales.

The Marine Conservation Society counted 88 items such as wet wipes, sanitary products and cotton buds for each 100m of shore it inspected. That compared with nine items per 100m south of the border.

Volunteers surveyed beaches and collected more than 35,000 items of sewage-related debris in Scotland during their 2022 beach clean.

The charity called on Scottish Water, the state-owned water and sewerage company, to step up monitoring of what it flushed into the sea.

Maurice Golden, the Conservative MSP, described the statistics as “truly awful”.

Currently 3 to 4 per cent of combined sewer overflows (CSOs) in Scotland are monitored and reported, compared with 96 per cent in Wales and 91 per cent in England.

Golden said: “I agree with the Marine Conservation Society that all combined sewer overflows should be monitored.”

He added that householders had a responsibility not to flush away inappropriate materials and called for more campaigning to raise public awareness.

Although the Scottish government and Scottish Water have urged people not to throw wet wipes and other products down the lavatory, the practice continues.

“We really need to educate the consumer about what they can and cannot put down the toilet,” Golden said. “I think there is a narrative in Scotland that we have lots of water and that it is almost free. But actually it costs a lot to get the water in to your house — and take waste water away.”

Alex Cole-Hamilton, the Scottish Liberal Democrat leader, said: “The Scottish government have been totally indifferent about the sewage flowing into our rivers and on to our beaches.

The Guardian

Voters won’t trust Labour if it backs Tory pollution plans, green groups warn

Labour will “lose public trust” over moves to clean up the environment if it continues to back Tory plans to scrap pollution rules for housebuilders, green groups have said.

Secretaries of state Michael Gove and Thérèse Coffey last week tabled an amendment to the levelling up bill removing rules that require local councils to block new homes in sensitive areas, such as the Lake District and Norfolk Broads, if they add to nutrient pollution in rivers.

Nutrients such as phosphates and nitrates come from sewage and cause algal blooms and loss of oxygen in rivers. The levelling up bill is being considered by the House of Lords, where it could still meet opposition.

The rules, called nutrient neutrality, were inherited from the EU habitats directive, which requires European countries to protect fragile ecosystems and endangered wildlife.

Labour leader Sir Keir Starmer and shadow environment minister Alex Sobel have both promised over the years Labour would adopt the EU’s strong environmental standards.

However, shadow levelling up secretary Lisa Nandy has come out in tentative support of the amendment and it is understood Labour would not repeal it if in power.

Labour’s tacit backing has alarmed wildlife groups. Craig Bennett, chief executive of The Wildlife Trusts, said: “Labour will lose public trust if they go along with government plans to remove laws that stop water pollution getting worse and force clean-up costs on to the taxpayer.

“This is a key test for Labour; will they lazily accept the false dichotomy that has been presented by the government, or will they offer a positive vision of how we can build hundreds of thousands of new homes in this country, but in a way that helps restore nature and clean up our environment, not turn the UK into the dirty man of Europe?”

While developers previously had to pay to clean up pollution and improve wetlands, the cost of the move, totalling £280m, will fall entirely on the taxpayer and the quango Natural England. The government has for years promised that leaving the EU would not mean lower environmental standards, but experts say the scrapping of this EU-derived environmental law will lead to increased pollution in important habitats.

Reacting to the government announcement last week, Nandy said: “Labour will support effective measures that get Britain building, but it’s laughable to think that a prime minister who is too weak to stand up to the nimbys on his own backbenches can be trusted to deliver the housing Britain needs.

The Guardian

Utility Week’s weekend press round-up is a curation of articles in the national newspapers relating to the energy and water sector. The views expressed are not those of Utility Week or Faversham House.