No cut off date for revenue cap is ‘troubling’, says Pinchbeck

The government’s decision to award itself open-ended powers in its new legislation to cap generators’ revenues is “troubling”, Energy UK’s chief executive has stated.

Giving the keynote speech at the industry body’s annual conference in London on Thursday (13 October), Emma Pinchbeck urged ministers to tread “carefully” on moves to impose a cap on low-carbon generation revenues.

The Energy Prices Bill, announced on Tuesday, gives the business and energy secretary powers to impose a temporary ‘cost-plus revenue limit’ on low carbon generators’ revenues but includes no end date for when it should expire.

Pinchbeck said: “It is very important that the government proceeds carefully with the revenue cap on low-carbon generators and other measures in the Energy Price Bill.

“We need to be careful that we don’t end up with short-term measures or undermine the UK’s reputation for stability and deter the investment we need for the next decades.

“In particular it is troubling for our industry to see a secretary of state take bold powers to intervene in our businesses with no sunset clause and the minister should expect a strong response from us on this and other points.

“Acting with speed is not the same thing as acting in haste, and that – as we are learning daily – investor trust is a much-undervalued commodity in the economy.”

Pinchbeck acknowledged in her speech that the way the wholesale system currently ties the price of low carbon power to the cost of gas is leading to “perverse outcomes” which need to be addressed.

“Every part of the industry needs to do their bit to help with the crisis.”

However, she said it is “baffling” that the government isn’t ramping up investment in energy efficiency and running a campaign to communicate “simple ways to reduce energy demand to the public.”

“It’s not just me – everyone from the Institute of Economic Affairs to the green NGOs agrees on this point.”

Energy minister Graham Stuart said at the Conservative Party conference last week that the government is investigating an energy saving public information campaign.

According to subsequent reports, this proposed campaign has been blocked by Liz Truss but she said during yesterday’s prime minister’s question time that the government is working on a plan to “help companies and individuals use energy more efficiently.”

Ofgem chief executive Jonathan Brearley said, in his keynote speech later during the Energy UK conference, that the regulator will “shortly” be launching a public information campaign to explain available support, how customers can reduce energy consumption and what they should expect from their suppliers.

He also said Ofgem is working on developing the regulatory framework for reviewing and approving network projects so that they can be delivered at the pace required to meet the government’s goal of a decarbonised grid by 2035.

But these upgrades are being held up by planning delays, Brearley said: “Our aim is that economic regulation should not be a blocker to the development of these transition projects.

“To keep pace with the changes we need, we need reform of planning process – it will not help if Ofgem and the industry act at pace, but projects remain delayed waiting for wider approvals.”

And referring to National Grid Electricity System Operator new Demand Flexibility Service, which is being launched at the beginning of November, Brearley “bet” that customers may be “more willing than we think to move their time of use of energy if the price is right”.