Insight: Editor’s week – Osborne’s budget delivers body blow to renewables; the CMA suggests price cap; Bristol Water claws back just £20m

An onslaught of high profile policy announcements rocked the utilities industry this week with the Treasury’s Summer Budget unleashing a shock change for the Climate Change Levy which seems set to kick the beleaguered renewables industry when it’s down. The CMA weighed in on both the energy and water sectors this week suggesting a partial regulation of prices for standard energy tariffs and offering Bristol Water only a modest loosening of their price controls.

Osborne’s budget delivers body blow to renewables sector

The Treasury’s decision to axe exemptions to the Climate Change Levy will come at multi-billion pound cost to renewable generators over the next five years.

Chancellor George Osborne said the move to scrap the levy exemption certificates (LECs), previously purchased by renewable energy customers, would protect taxpayer money benefitting renewable generators in foreign countries. But analysts said the government data suggested generators in the UK would bear the brunt of the cost.

The Treasury said it would target 90TWh of renewable energy to the tune of £5.54/MWh – figures that suggests all renewable energy consumed in the UK (where the overall total is 300TWh a year) will be included whether produced by local generators or not.

UK energy suppliers face partial price regulation under CMA

The UK’s energy companies face the possibility of partial tariff regulation under measures put forward by the Competition and Markets Authority, after the authority accused suppliers of taking advantage of their disengaged customers.

If the CMA’s proposed remedies, published today, are implemented in full suppliers could be forced to offer a ‘safeguard tariff’ with a fixed maximum price so that customers who have never switched from the standard variable tariff (SVT) are protected against rising costs while wider reforms are made.

The CMA has put forward around 20 proposed market reforms which broadly aim to boost competition within the retail energy market and remove barriers to engagement for the 34 per cent of customers who have never switched.

Bristol Water claws back just £20m through the CMA

Bristol Water has only gained an additional £20 million in wholesale expenditure under the provisional final determination set out by the Competition and Markets Authority (CMA).

The water company will see its allowed wholesale cost expenditure increase from the £409 million set by Ofwat in its final determination, to £429 million under the CMA’s provisional findings. This remains substantially lower than the £537 million the water company set out in its final business plan.

The wholesale cost of capital set out by the CMA for water company is also slightly more generous than that set out by the regulator, at 3.65 per cent compared to 3.6 percent, but this is again substantially lower than that proposed by Bristol Water of 4.37 per cent.