Festive press round-up: Nuclear plants face shutdown over tax on windfalls

Our review of national media coverage of the sector over Christmas and New Year covers reaction to the windfall tax on electricity generators, including a potential legal challenge. There was also speculation as to the amount of customer credit balances being kept by retailers, concern over sewage spills and analysis of falling gas prices.

Nuclear plants face shutdown over tax on windfalls

Two nuclear power stations crucial to keeping Britain’s lights on risk being closed next year as a result of Jeremy Hunt’s windfall tax, their French owner warns today.

EDF, which operates all five of the country’s serving nuclear plants, said the Chancellor’s raid on power producers will make it harder to keep the ageing Heysham 1 and Hartlepool stations open as long as hoped.

It would mean the sites close in March 2024, potentially removing the “cushion” of spare capacity used by the National Grid to avoid blackouts and reducing nuclear power generation in Britain to its lowest level since the 1960s.

Rachael Glaving, commercial director of generation at EDF UK, which is owned by the French state, said the windfall tax will damage the business case for the facilities at a time when inflation is already pushing up other costs.

She told The Telegraph: “We accept there’s definitely a need for a levy of some kind – you’ve got to break the link between really high gas prices and the impact they have on power prices.

“But of course that’s going to factor into the business case of life extension and we’ll have to take that [the windfall tax] into consideration. It’s not going to make it easier.

“We will review the technical aspects but we also need a business case to support any life extension, so that has to be factored in as well, and we will have to work out what the right balance is between those two things.”

Experts last night warned that closing the two nuclear power stations would mostly wipe out the four-gigawatt spare capacity the National Grid maintains to avoid blackouts on still, overcast days when wind and solar generation is limited.

The Daily Telegraph

31/12/22

UK faces legal action over windfall tax on energy companies

A UK developer of onshore wind farms is threatening the government with legal action unless it scraps or amends a new windfall tax on low-carbon electricity generators that will help subsidise household energy bills.

Community Windpower, a private company that operates eight wind farms in Scotland, has written to Treasury chief secretary John Glen claiming that the tax is “unfairly disproportionate, discriminatory and adverse to the government’s [2050] net zero [emissions] strategy”.

The Cheshire-based company is the first low-carbon electricity generator to threaten legal action against the government’s planned levy.

Community Windpower is warning that some of its proposed new wind farms will be put at risk by the windfall tax, and it has hired the law firm Mishcon de Reya to pursue the case.

Chancellor Jeremy Hunt announced the “electricity generator levy” in his Autumn Statement in November, to help raise funds for the government’s subsidy regime to partially shield households from high energy prices until April 2024.

Hunt’s tax on low-carbon power generators will come into force on January 1 and is intended to raise more than £14.2bn by its anticipated withdrawal date of March 31 2028 by adding a 45 per cent charge on wholesale electricity sold at an average price in excess of £75 per megawatt hour.

Rod Wood, managing director of Community Windpower, said the £75/MWh level of the levy would effectively block new onshore wind projects because many developers have witnessed a big jump in their financing costs following recent turmoil in UK financial markets, while the price of turbines is also rising because of supply chain inflation.

“This needs to be made to work, otherwise there simply will be a moratorium on new investment in this sector,” said Wood, who called the levy a “smash and grab raid on renewables” that will “pull the rug out from under the UK’s efforts” to bolster its energy security and cut carbon emissions.

He said the levy was discriminatory as it only applied to low-carbon electricity generators including solar, wind, nuclear and biomass but controversially would not target gas and coal-fired power station operators, some of which have been reporting strong profits.

Community Windpower is urging the government to reconsider the level of the levy and make other changes, including the addition of an investment allowance similar to one that has been provided to oil and gas companies alongside a separate windfall tax on that sector to help pay for the cost of government support on household energy bills. The allowance is meant to encourage new fossil fuel projects in the UK North Sea.

The Treasury said the electricity generator levy was “not designed to penalise electricity generators” but was instead a “response to the fact that, as a result of exceptional and unforeseen geopolitical events, some electricity generators are realising extraordinary returns from higher electricity prices”.

“The continued investment of generators in the industry is vital to our long-term energy security, and this levy leaves them with a share of the upside they receive at times of high wholesale prices,” said the Treasury.

The Financial Times

28/12/22

More energy firms stand on the brink after Bulb collapse

Ministers are braced for a fresh wave of energy collapses as another supplier battles for survival.

Outfox the Market, which has about 100,000 customers, faces an uncertain future after the industry regulator Ofgem told it to get its house in order or have its licence revoked.

Outfox the Market is the trading name of Leicester-based Foxglove Energy Supply, which was launched by husband and wife Keith and Maria Bastian in 2015.

Earlier this month, Ofgem issued Foxglove with a warning that it had three months to sort out its finances, including bolstering its cash position and increasing its energy hedging, or else it would be stripped of its licence.

Industry sources have expressed surprise that Foxglove survived the last wave of casualties that swept through the market in 2021. Government officials are said to be closely monitoring the company.

Keith and Maria Bastian stepped down last year as directors of Foxglove, which sources its electricity from Denmark’s Orsted. Turnover in 2021 topped £100 million, but the start of the energy crisis pushed the company to a £4 million loss.

The couple’s other business, Fischer Future Heat UK Ltd, faced criminal proceedings after it was accused of making false claims to customers about its heaters. However, Trading Standards struck a deal with the Bastians, who denied any wrongdoing, with undertakings including that they cannot refer to sales people as engineers.

The Times

01/01/23

Energy firms hoard £2bn of customers’ cash

Energy companies are hoarding nearly £2 billion of customers’ cash amid the cost of living crisis, The Telegraph can disclose.

Gas and electricity suppliers are raising customers’ direct debit payments even when they are thousands of pounds in credit, an investigation has found.

Some companies have been accused of using the money as a cheap source of finance whilst many British households struggle to make ends meet.

On Monday Christine Farnish, a former board member of Ofgem, the energy regulator, criticised the watchdog for allowing firms to behave in this way.

Writing exclusively for The Telegraph, Ms Farnish – who quit earlier this year in a row over changes to the way the energy price cap is set – said: “Energy firms are allowed to put their metaphorical hand into a customer’s pocket and use advance customer payments to fund their own businesses.

“It’s my guess that hard-pressed families have no idea that part of their energy direct debits are used to provide cheap financing for their supplier, rather than actually paying for energy consumed.”

The Telegraph is aware of more than a dozen households whose energy companies have put up their monthly payments automatically, even though they are more than £1,000 in credit.

One customer, who handed EDF more than £2,300 for energy she has not yet used, said she had barely turned her heating on this winter but still faced an increase in payments. After being contacted by reporters at The Telegraph, the company apologised and lowered the customer’s payments.

This advance payment is almost the same as the average household’s annual energy bill under the Government’s cap.

The Telegraph analysed companies’ most recent financial statements and used their “deferred income” as a proxy for customer credit balances, where no more granular detail was given.

This same methodology was used in a recent report from analysis firm Oxera, commissioned by Ofgem and published on the watchdog’s website. Reporters also obtained information from well-placed industry sources.

Centrica, the owner of British Gas, held around £588 million of money that customers had paid in advance. Whilst it is the highest figure for any company, Centrica has stated that it “ringfences” these funds, so the money is not used as working capital.

The Telegraph found that many firms, including Octopus and Ovo, held more than £100 million in customer credit. Shell held £45 million.

Octopus said it does not use customer credit balances to fuel growth, but admitted that it does use some money to offset the bills that other customers have run up but are yet to pay.

Shell uses customer credit balances as working capital, but said it does not rely on them and has access to the funding it needs from other sources.

Read the full article here (subscription required)

The Daily Telegraph

26/12/22

European gas prices fall to pre-Ukraine war level

European gas prices have dipped to a level last seen before Russia launched its invasion of Ukraine in February, after warmer weather across the continent eased concerns over shortages.

The month-ahead European gas future contract dropped as low as €76.78 per megawatt hour on Wednesday, the lowest level in 10 months, before closing higher at €83.70, according to Refinitiv, a data company.

On Tuesday 83.2% of EU gas storage was filled, data from industry body Gas Infrastructure Europe showed. The EU in May set a target of filling 80% of its gas storage capacity by the start of November to prepare for winter. It hit that target in August, and by mid-November it had peaked at more than 95%.

Gas prices bounced further off the 10-month low on Thursday to reach €85.50 per megawatt hour.

Europe has several months of domestic heating demand ahead, and some industry bosses believe energy shortages could also be a problem next winter. However, traders have also had to weigh the effects of recessions expected in several big European economies, which could dent energy demand.

UK gas prices have also dropped back from their highs earlier this year. The day-ahead gas price closed at 155p per therm on Wednesday, compared with 200p/therm at the start of 2022, and more than 500p/therm in August.

The Guardian

29/12/22

Sewage was dumped every four minutes during Therese Coffey’s three years as water minister

The recently appointed Environment Secretary presided over an average of a new sewage dump every four minutes in her previous stint as water minister, new research suggests.

There was an average of nearly three million hours of sewage discharge into waterways and sea during Therese Coffey’s tenure as a junior minister, the analysis of Environment Agency (EA) data obtained by Labour under freedom of information laws suggests.

This equates to more than 321 years’ worth of sewage dumped in England and Wales over Ms Coffey’s three years in the job between 2016 and 2019.

Labour said the fresh revelations about Ms Coffey’s “sewage-infested” record in office raised questions about Prime Minister Rishi Sunak’s decision to move her to Environment Secretary.

The party revealed last month that sewage discharges more than doubled during the Environment Secretary’s previous role as a junior minister, coinciding with her decision to cut a key environment protection “grant in aid” fund for the EA by around a third (£24m).

Ms Coffey was also forced to admit in October the Government was breaching its own Environment Act by delaying the publication of clean water and biodiversity targets beyond the end of that month.

i News

30/12/22

Environment Agency boss keeps bonus despite row over sewage

The chief executive of the Environment Agency said that he deserved his bonus after he was asked if he would give it to staff reliant on food banks.

In a call with staff, Sir James Bevan was asked if he would consider donating his bonus of between £10,000 and £15,000. The former diplomat, who is stepping down in March, said: “I understand very well how tough it is for many of our staff right now. I know that many of our staff are finding it very difficult to cope on the wages that we are paying them, the wages the government allows us to pay them.

“I know that many of our staff are having to resort to some very difficult measures to cope, including using food banks.”

However, he defended the bonuses. “I do think my exec director colleagues and, frankly, I, ought to be eligible for those things and have the right to accept them if we’re offered them.”

He added: “I think we do do tough jobs, and do experience some stresses and strains that no one else has to carry, so I wouldn’t want to exclude us from performance-related pay.”

The Times

31/12/22

Thames Water says Oxfordshire sewage discharge is unacceptable

A water company has said putting sewage into rivers is “unacceptable” but “sometimes necessary” after repeated discharges.

There have been five releases at Witney Sewage Treatment Works (WSTW), in Oxfordshire between 21 and 28 December.

“Putting untreated sewage into rivers is unacceptable to us, but after heavy rain it’s sometimes necessary and permitted,” Thames Water said.

A campaign group said discharges are an example of using rivers “as a toilet”.

In the last eight days, there have five separate sewage discharges at Witney, including one on Christmas Day. They happened at:

20:15 GMT on 21 December

14:15 GMT on 22 December

10:00 GMT on 23 December

09:45 GMT on 25 December

06:30 GMT on 28 December

Former singer of The Undertones, Feargal Sharkey, who is a renowned campaigner against the pollution of British rivers, tweeted that the Christmas Day release was taking place in a part of river that was designated for bathing.

A Thames Water spokesperson said the release of sewage “prevents it flooding homes, gardens, streets, and open spaces”.

“With the help of the government, Ofwat and the Environment Agency, we’re working hard to make these releases unnecessary.”

“We are currently increasing sewage treatment capacity at a number of our sewage works across the Thames Valley, including Witney and Fairford to be completed by 2025.”

They added there are flood alerts for River Thames and local tributaries.

Ash Smith, from Windrush Against Sewage Pollution said the discharges in Witney are “just another example of the water industry using our rivers as a toilet”.

He said Thames Water’s works won’t address the issues with “broken” sewers in which “water is getting into them at this time of year, overwhelming the sewage works in a major fashion”.

BBC News

29/12/22

Mark Carney’s investment company closing in on major Octopus Energy stake

Former Bank of England governor Mark Carney’s latest venture is set to take control of a fifth of Octopus Energy as part of a £10bn takeover deal.

Brookfield Asset Management, chaired by Mr Carney, is leading a $12.3bn [£10bn] takeover bid for Australian utility Origin Energy, putting Brookfield on course to indirectly own a chunk of UK household gas and electricity supplier Octopus.

Origin Energy owns 20pc of Octopus. The Australian business first invested in Octopus in May 2020, and has since increased its investment to maintain its 20pc stake.

Brookfield is bidding for Origin Energy through its $15bn Brookfield Global Transition Fund, which it raised in June 2022 to invest in ventures helping to cut carbon emissions.

Brookfield and bidding partner MidOcean Energy have until January 16 to finalise their offer for Origin.

The Daily Telegraph

26/12/22

£50m fund will boost UK nuclear fuel projects, ministers say

A £50m nuclear fuel fund to bolster production in the UK and support development of alternatives to Russian supply opens for applications on Monday, the business department has announced.

The fund forms part of a nuclear fuel investment package of up to £75m, of which up to £13m has already been awarded to the nuclear fuel fabricators Westinghouse in Preston, helping the company develop conversion capability for reprocessed uranium and freshly mined uranium.

Uranium conversion is an important stage in the nuclear fuel cycle. The funding is designed to create capability to convert recycled uranium in the UK that is not currently available outside Russia. As well as strengthening UK energy security, ministers hope it will also open up new export opportunities.

G7 leaders agreed in June to take collective action to reduce reliance on civil nuclear and related goods from Russia, including diversifying their supplies of uranium and nuclear fuel production capability. Russia owns about 20% of global uranium conversion capacity and 40% of enrichment capacity.

Graham Stuart, the energy and climate minister, said: “Record high global gas prices, caused by Putin’s illegal invasion of Ukraine, have highlighted the need for more homegrown renewable energy, but also UK-generated nuclear power – building more plants, and developing domestic fuel capability.

“This investment package will strengthen the UK’s energy security, by ensuring access to a safe and secure supply of UK-produced fuel to power the UK nuclear fleet of today and tomorrow – squeezing out Russian influence, while creating more UK jobs and export opportunities.”

The £50m fund will support projects such as fuel supply options for light water reactors, including future small modular reactors. It will also look to support projects producing new fuel types that will be needed to supply advanced modular reactors, likely to be in operation from the 2030s, such as high-assay low-enriched uranium.

The Guardian

02/01/23

Heritage rules block energy efficiency and renewables for historic UK homes

Local councils in England are holding back owners of historic homes from adopting energy efficiency measures or renewables, leaving residents battling soaring energy bills and cold weather this winter.

Councils are coming under growing pressure from residents who want to better insulate their homes and make them cheaper to run but are blocked from doing so by rules designed to protect heritage.

Hundreds of thousands of significant historic buildings are “listed”, meaning owners require special permission to make any changes to the fabric of their homes.

So far just one council, the Royal Borough of Kensington and Chelsea, has moved to loosen those restrictions. Earlier this year RBKC allowed solar panels to be added to any grade II-listed property in the borough except churches. It is now consulting on plans to allow owners of the roughly 4,000 listed buildings in the borough to install double-glazed windows without needing individual permission.

The UK’s housing stock is among the oldest in the world and poorly-insulated homes are a major contributor to greenhouse gas emissions, which the government has pledged to reduce to net zero by 2050.

Older properties tend to be leakier, but owners of listed homes must obtain special permission to make alterations — requiring them to navigate planning departments that have been cut drastically in recent years.

“There are some resourcing challenges for local governments . . . There’s an obvious caseload pressure on conservation officers,” said Victoria Thomson, head of national strategy at Historic England, the public body responsible for protecting listed buildings.

The English planning system, in which permissions are granted on a case-by-case basis, has advantages, “but without a definitive list of binding rules there can be scope for uncertainty”, she added.

Historic England, which is largely government funded and has a remit to preserve ancient monuments and historic buildings, has recently updated its guidance to owners of listed homes. But it does not free them from the requirement to gain specific permissions.

Where the body has expressed a view on whether alterations should generally be made easier, it has been conservative: while it was supportive of RBKC’s move to offer blanket permission for solar panels on listed homes in principle, it counselled against rapid or wide-ranging changes to the planning system.

The national government has previously intervened to enable homeowners to alter their homes where there is a clear environmental goal. In 2015 it allowed owners of non-listed homes to attach solar panels to their roofs without specific permission.

But listed buildings require planning permission unless it is waived by local councils. According to the Local Government Authority, RBKC remains the only council to have simplified the approvals process.

The government’s levelling up and regeneration bill, currently making its way through parliament, could spur progress at the local level.

A recent Conservative amendment would require the government “to make regulations making it easier for owners of residential listed buildings to improve the energy efficiency of their buildings and, importantly, place requirements on Historic England to be supportive of such measures and efforts taken by residents”.

But even if the new clause makes its way in the bill, it is unlikely to be a silver bullet. (Richard) Fuller’s amendment calls for “greater clarity, advice and support on how residential listed properties can improve their energy efficiency”, but “does not provide any detail on what this might look like and how it would work,” according to the LGA.

The Financial Times

30/12/22

2 in 3 new charging points for electric cars will be in London

Nearly two thirds of the electric car charging points planned by local authorities this year are in London, exacerbating the divide between the capital and the rest of the country.

There are almost 37,000 public charging points in the UK, up 33 per cent on a year ago, according to Zap Map, an online service. The government wants 300,000 by 2030, to help people without off-street parking.

Many of the chargers are on private networks run by big energy companies. But local authorities are also expected to roll out charge points.

A freedom of information request by the Liberal Democrats shows 77 local authorities are planning 12,699 new chargers this year. A further 54 have no plans for charging points and the rest of the country’s councils did not respond.

London boroughs are behind 8,172 of the planned chargers, or 64 per cent. Croydon is the leading local authority, accounting for 1,300. Increasing the availability of public charging is considered essential to encourage the use of electric vehicles, seen as a key way to decarbonise transport. Transport overtook the energy sector as the biggest emitter of carbon in 2016. It is responsible for 31.5 per cent of UK emissions.

Yet the plans by local authorities are set to deepen a divide between London and elsewhere on access to chargers.

Research by the House of Commons Library shows the UK has 52 chargers per 100,000 people. But inner London has more than three times that at 183 per 100,000. By comparison, Greater Manchester has 18 per 100,000 and the country’s car manufacturing heartland, the West Midlands, 48 per 100,000. Nationally, Westminster has the highest, at 554 per 100,000, compared with just 3 per 100,000 in Castle Point, Essex. Scotland is above average, at 60 per 100,000. The high number in the capital is despite inner London having 8.5 per cent fewer electric vehicles than the UK average.

The Times

02/01/23

Deloitte cuts UK office temperatures by 2C to save energy

Deloitte is reducing temperatures in its UK offices in a bid to cut costs and carbon emissions.

The thermostat is being lowered by 2C across 22 sites, some of which were also temporarily closed over Christmas, to reduce energy consumption.

The consultancy and accountancy firm informed staff of the plans this month, which are expected to result in savings of about £75,000 for December.

Energy costs have soared in the wake of Covid and the invasion of Ukraine.

Deloitte told its 23,000 UK staff that its offices would now be heated to between 19 and 22C as part of new energy-saving plans.

It said that the temperature range in its UK offices, while lower, would still be more than the minimum 16C guideline from the Health and Safety Executive for those in desk jobs.

The company has offices in locations including London, Cambridge, Manchester, Birmingham, Leeds, Newcastle, Reading, Bristol, Cardiff, Aberdeen, Glasgow, Edinburgh and Belfast.

The savings from December will be donated to disability charity Scope, with its UK chief executive Richard Houston saying that he hoped it would make a difference to those hit hardest by the increasing cost of living.

It comes after several other big consultancies such as KPMG and PwC temporarily shut down some of their offices in the UK over the festive period to cut down on energy consumption.

BBC News

29/12/22

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.