Standard content for Members only
To continue reading this article, please login to your Utility Week account, Start 14 day trial or Become a member.
If your organisation already has a corporate membership and you haven’t activated it simply follow the register link below. Check here.
EDF Energy could be in line for windfall profits as the lifespan of its existing nuclear fleet is extended while other vertically integrated players face increasingly challenging market conditions for thermal generation, the CMA has heard.
The concerns were raised by independent energy supplier Utility Warehouse in a formal hearing as part of the Competition and Markets Authority (CMA) investigation into the energy sector.
The supplier warned that competition in the retail energy market could be distorted because EDF Energy has the ability to “cross-subsidise the retail part of its business with cheaper energy from its generation business” either by selling the electricity on the open market or by reducing its retail prices, the CMA heard.
“The energy which EDF Energy generated at its nuclear plants could be available to it at a price significantly below that of the open market, which could enable EDF Energy to cut its own prices and distort the retail market,” Utility Warehouse told the CMA.
For example in January this year the operator said it had extended the lifetime of its Dungeness B nuclear power station by ten years to 2028.
By contrast, other vertically integrated companies are exposed to the rising cost of emissions through both the EU carbon market and the UK’s own carbon tax due to its thermal generation interests. In addition, gas-fired power profits are exposed to the risk of volatile gas prices.
Utility Warehouse is one of the largest independent suppliers in the market after acquiring 700,000 customers from npower in late 2013, but unlike its big six rivals holds no generating capacity and is fixed into a 20 year supply contract with npower which expires in 2034.
The independent supplier acknowledged that the decision to allow EDF Energy to extend its nuclear lifespan is a “political” one, driven by the need to secure supply and decarbonise the sector, but said the decision did not take account of the impact it would have on the retail market.
The CMA is expected to make its preliminary findings known in summer this year before completing the sector-wide probe by Christmas.
Please login or Register to leave a comment.