Labour’s energy plans ‘unworkable’ warns consultant

Proposals would push up funding costs say Baringa Partners

Labour’s plans to nationalise energy would push up funding costs, according to a leading consultant.

The manifesto of the Labour Party, which is threatening to overtake the Conservatives according to some opinion polls, states that it would “regain control” of energy supply networks by altering national and regional network operators’ license conditions.

Last month, Labour’s energy spokesman Alan Whitehead told Utility Week that the party is exploring moves to rail franchise-style network licenses that would have an expiry date.

Under the current licensing regime introduced by the 1989 Electricity Act and entrenched by the 2000 Utilities Act, Whitehead there are no cut off dates for network operating licenses.

Whitehead said Labour would explore introducing termination points for network licenses akin to those used in train franchises where companies bid to run a section of the rail network for a set period of time.

But Ryan Thomson, a partner at consultants Baringa Partners, said that Labour’s plans were “unworkable” and would increase funding costs

He said: “Funding costs would increase straightaway because the funding one can attract for these assets at the moment are very, very low.”

Thomson said that in order for Labour’s plans to work, there would need to be a split between operations and the ownership of the physical assets like wires and cables.

This would be akin to arrangements on the railways where train operating companies, which hold rail franchises, lease rolling stock rather than owning it themselves.

He said that such an arrangement would increase the complexity of arrangements and queried whether the licensee or the asset owners would be responsible for their maintenance.