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This week’s round-up of stories form the weekend national newspaper coverage saw pressures mounting on government to take action against the energy crisis as plans to offset bills with a council tax rebate are on the table for low and middle income households. Elsewhere, the Labour party makes a bid for re-nationalisation of water companies.
Ministers plan council tax rebates to offset huge rises in energy bills
Millions of people could be given council tax rebates worth hundreds of pounds under plans to limit the impact of soaring energy prices.
Boris Johnson is due to meet Rishi Sunak, the chancellor, early next week to discuss options for dealing with the cost-of-living crisis.
The energy price cap is forecast to rise by about 50% to as much as £2,000 a year from April, meaning that 22 million households will face higher bills.
Sunak is understood to want to ensure that any government support is targeted at those who need it the most.
Under one plan being considered people in less expensive homes in council tax bands A to C would receive significant discounts on their bills. Those in the lowest bands would receive the most. Ministers have acknowledged that the measure is not perfect because council tax bands were set in 1991, meaning many of the people who benefit, particularly in London and the South East, will be relatively wealthy because property prices have increased significantly since then.
However, there are concerns that other proposals to increase people’s benefit payments, specifically the winter fuel allowance and child benefit, are too narrow. “This is about helping people on both low and lower-to-middle incomes,” a government source said. Plans to give households £500 in cash have been rejected: “We simply don’t have the infrastructure for it.”
Ministers have also been considering scrapping green levies from energy bills. However officials have concluded that because the government is contractually obliged to pay them they would simply be moved from energy bills to general taxation.
A government source said that Sunak was looking to announce a “package of measures” that would provide some help for all households, with extra benefits for those least able to afford the price rises.
The Treasury is understood to be “seriously considering” a scheme that would allow energy companies to borrow money to keep bills lower than they would otherwise be in April.
The money would be paid back by not reducing bills immediately when the cost of wholesale gas and electricity fell. One source said the idea had merit, although there are concerns that the plan could be unsustainable if wholesale costs do not reduce significantly in the next year.
Read more – The Times
Labour has vowed to fix the “broken system” which has allowed water companies to cut the sums spent on keeping rivers clean from raw sewage while paying out huge dividends to shareholders.
Households in England have paid out up to £138 a year over the past decade to cover the cost of dividends at the country’s biggest water providers, according to Labour’s analysis of the firms’ financial figures.
Sir Keir Starmer’s party also highlighted research showing that the companies have cut investment in the wastewater and sewage network by more than £520m since the 1990s
Jim McMahon, shadow environment secretary, told The Independent: “The system is clearly broken and the government is refusing to listen to Labour’s calls for higher fines for water companies … as well as a proper plan for reducing raw sewage being discharged.”
The Labour MP added: “Labour’s contract with the British people for prosperity, security and respect will see an end to sewage dumping to clean up our rivers, lakes and seas.”
It comes as outrage builds over river pollution – after it emerged this week that more than two billion litres of raw sewage was dumped in the River Thames over a two-day period.
Thames Water admitted that an “unacceptable” amount of sewage had flowed into the river from its Mogden wastewater treatment works during a 48-hour period in October 2020.
Investment in the wastewater and sewage network among the biggest operators in England and Wales has been cut from £2.9bn a year in the 1990s to £2.4bn, according to recently published figures.
The data on critical investment came from regulator Ofwat, obtained through freedom of information requests by the Windrush Against Sewage Pollution group.
Anti-pollution campaigners claim that companies have been using the illegal dumping of untreated sewage as a way of avoiding proper investment in their networks.
Water companies were responsible for nearly 400,000 sewage dumping events in 2020 alone, according to the Environment Agency.
Labour pointed to research from the University of Greenwich which shows almost £19bn was paid out in dividends to shareholders in the nine major water companies operating in England between 2010 and 2021.
The study found that the dividends increased the cost to consumers by between £32 and £138 a year during the period, depending on the company.
However, Water UK, the representative body for the water companies, said the University of Greenwich report “builds on work that has previously been discredited, with water companies’ accounts misread, and the dividend numbers quoted for some companies simply wrong, and massively overstated”.
Emmanuel Macron hammers EDF as Britain’s nuclear energy future hangs in the balance
Business secretary Kwasi Kwarteng donned a hard hat and a high-vis jacket earlier this month to visit Hinkley Point C — the vast new nuclear power station being built in Somerset by French giant EDF. The tried and tested photo opportunity allowed Kwarteng to reaffirm that the UK is “firmly committed to deploying new nuclear” to provide “continuous, low-carbon electricity at scale”.
At the same moment, across the English Channel, French president Emmanuel Macron was about to spring a nasty surprise on EDF. Macron ordered the company to sell more electricity at knock-down prices to its competitors, in order to keep a lid on soaring energy bills.
For Macron, it makes complete political sense. Three months out from an election, he is keen to temper voter anger over energy costs, which, as in the UK, have been pushed higher by surging gas prices. EDF is 84% owned by the French state and has to bow to its will — even when the government’s intervention is “painful and defies good economic sense”, as newspaper Le Monde put it.
EDF calculated that Macron’s demand would cost it €8.4 billion (£7 billion). The company had no choice but to scrap its profit guidance for the year and warned investors that it may need to seek more capital. Shares in EDF, listed in Paris, plunged.
In a leaked memo, chief executive Jean-Bernard Levy claimed that Macron’s demand was a “real shock”. “It is going to weigh very heavily on our results,” he added. Trade union members at EDF have called for a strike this week in protest at the president’s order.
EDF, which is a big player in the UK and Italy as well as France, reported revenues in the nine months to September of €57.1 billion — a 15.7 per cent uplift. However, its debt pile is pushing €41 billion. Its health matters to the UK because the future of our nuclear energy programme depends on its involvement.
A string of companies have backed out of British projects in recent years, while the UK government has indicated that it will no longer countenance working with the Chinese — leaving the French operator as the last man standing.
Macron’s edict, though, could not have come at a worse time for EDF, which was already facing huge demands on its capital. On the same day that Kwarteng toured Hinkley, the company cut its expected output of nuclear power this year by 8 per cent, after warning that five faulty reactors in France would have to stay offline while being serviced for longer than expected. This pushed the total number of EDF reactors currently offline to nine.
At a time when France— and Europe — is crying out for lower energy prices, EDF is unable to add to supply.
Energy bills crisis: five UK business groups demand urgent action
Five of Britain’s leading business groups have demanded urgent and decisive government help to tackle the UK’s energy crisis, warning failure to act will result in lower investment, an increase in poverty and the risk of an inflationary spiral.
In a letter to Rishi Sunak, the heads of the CBI, the British Chambers of Commerce, the Institute of Directors, Make UK and the Federation of Small Businesses said “rocketing” domestic and business bills would put the brake on economic recovery.
“As a collection of business groups, we are writing to ask you to act urgently and decisively to support consumers with spiralling bills and help business manage inflated costs over the medium term,” the letter said.
Sunak and the business secretary, Kwasi Kwarteng, have been working on possible measures to soften the impact of an expected rise in energy bills of nearly 50% – amounting to £600 a year for the average household – when the price cap is lifted in April.
Ofgem, the energy regulator, will announce the new price cap early next month, and Kwarteng said Sunak would use his spring statement on 23 March to outline a support package.
In a reflection of the growing concern felt by companies of all sizes, the five business groups stressed the likely damage to household budgets if the government failed to act.
They noted a rise in the average household energy bill to £2,000 a year would alone add 1-2 percentage points to the annual inflation rate – already at a 30-year-high of 5.4% – and force a further 2 million people into fuel poverty.
“It will hurt low-income households most acutely, but these cost increases will have knock on impacts throughout the economy,” the letter said. “We therefore urge [the] government to take action to mitigate rising domestic bills and support the most vulnerable.”
The letter said businesses had also been affected by steep rises in their energy bills, with further increases looming as fixed tariff contracts came to an end.
“The scale of the crisis has left companies with little protection while they face dealing with soaring wage, shipping and tax costs. Small and medium-sized businesses are the most at risk. Many companies will be left with little other choice than to pass costs on to their customers, adding further inflationary pressure,” the groups said.
Along with other countries, Britain has been affected by an increase in the global wholesale price of gas, in part triggered by higher demand as countries have emerged from the pandemic.
The business groups said, however, the UK was facing a medium-term crisis rather than a short-term seasonal one.
“To strengthen the UK energy system for the future, businesses support a regulatory approach that builds resilience in the domestic supplier base, drives competitiveness of UK industry and incentivises investment in the green economy,” they said.
Rolls-Royce seeks bids for site to make small nuclear power plants
Rolls-Royce, the UK aero-engine maker, has launched a competition between regions in England and Wales to be the location of the main factory to build a planned fleet of small nuclear reactors.
An industry consortium led by Rolls-Royce has written to several of England’s regional development bodies and the Welsh government asking them to pitch for the manufacturing site, promising investment of up to £200m and the creation of up to 200 direct jobs.
The consortium secured £210m from the government last year towards the development of a fleet of mini-reactors after raising a similar amount of private sector funding.
UK prime minister Boris Johnson backed small modular reactors as part of his 10-point plan for a “green industrial revolution” to help meet the government’s 2050 net zero carbon target.
The technology is viewed within the government as a good way to create manufacturing jobs as well as delivering on Johnson’s “levelling up” agenda to help less developed areas. Under the plans, the reactors will be built in factories around the country and then assembled on site, reducing the risks and huge costs of construction of big nuclear power plants.
The main factory will build the heavy pressure vessels that are part of the reactors. In its pitch sent to the Local Enterprise Partnerships, voluntary bodies designed to bring business and council leaders together to help set local economic priorities, Rolls-Royce promised that the community chosen to host the factory would benefit from “high value, sustainable jobs which will produce products that will be exported globally for many decades to come”.
The company added that it was looking for proposals that identified “sites based on our selection criteria in your region together with supporting evidence or financial and non- financial support where appropriate”.
Rolls-Royce is not believed to be looking for cash from local councils but is interested in what sort of skills training facilities already exist, how much land is available and local incentives for the deployment of on-site renewable power generation among other things. The company intends to build other, smaller facilities to build modules for the reactors.
The reactors themselves will be installed at existing nuclear sites in Britain. Rolls-Royce has not yet committed to any sites but Wylfa and Trawsfynydd in north Wales are believed to be under consideration.
Hundreds protest in Oxford over sewage in River Thames
About 200 people have gathered to protest against sewage release into the River Thames.
The protest in Port Meadow, Oxford, comes after swimmers swam through raw sewage on Christmas Day when Thames Water sent a late warning.
The firm previously apologised and said it was working to improve conditions.
Protesters said they wanted an end to raw sewage being pumped into the Thames.
Thames Water blamed an IT failure after notifications sent to Oxford swimming group Brrrrr! on Christmas Day, arrived on Boxing day.
Swimmer Jo Sandelson said: “Notifications of more dumping are happening now on an almost daily basis and this is illegal outside of heavy rain events.
“We are protesting against the endless stream of sewage being pumped into our precious river by Thames Water.
“It’s destroying our wildlife habitat, our well-being and even threatening the quality of our drinking water.”
A decision is expected imminently from the government over Oxford City Council’s application to have wild swimming spots in Oxford awarded bathing water status, Oxford West and Abingdon MP Layla Moran said.
She said: “It’s absolutely incredible to see so many people, it shows how desperately they want action not just words and we’re intent on trying to deliver that for them.”
Water companies are allowed to release sewage into rivers after certain weather events, such as prolonged periods of heavy rain.
Richard Aylard, sustainability director at Thames Water, said: “We don’t think that any discharge of untreated sewage is acceptable whether it is legal or not is secondary.
“It’s unacceptable and were doing what we can to get that phased out as quickly as possible as part of a wider turnaround plan in the company.”
He added the firm is investigating footage of what looks like untreated sewage coming out of a overflow pipe connected to Thames Water’s Cassington treatment works.
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.
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