Weekend press: Minister calls for more hosepipe bans

In Utility Week's latest roundup of the weekend news, George Eustice calls on water companies to introduce more hosepipe bans as the UK faces drought, and the cost to taxpayers and billpayers of supplier failures is explored.

Minister calls on water firms to introduce more hosepipe bans

Further hosepipe bans could be introduced after the environment secretary called for water companies to implement restrictions, the first public intervention by a minister over the potential drought.

George Eustice said it was “right” that some firms had already taken action to address the driest period in England since 1976.

Southern Water has enforced a hosepipe ban in Hampshire and the Isle of Wight. South East Water will enforce a ban from next Friday, while Welsh Water will introduce one for Pembrokeshire and Carmarthenshire from 19 August barring households from using hosepipes to water their garden, wash their car or fill pools.

In an article for the Sunday Telegraph, Eustice said: “I strongly urge other water companies to take responsible action to protect and preserve our water supplies during this exceptionally dry period.”

Eustice also urged companies to do more to reduce leaks and said the government would finalise plans to make it easier to gain planning permission for new reservoirs by the end of this year.

He added: “Water companies have a duty to ensure adequate supply, and they have assured me that essential water supplies are safe.

It comes after the UK Centre for Ecology and Hydrology said most of the UK’s rivers were on “red alert” with campaigners calling for immediate nationwide hosepipe bans.

Last month was the driest July in England for more than 100 years and some areas have had their driest summer on record.

According to forecasts, rivers are set at the most severe drought warning level across the country, even in areas where there has been rain in recent weeks.

The Rivers Trust has accused water companies of waiting until the last minute to implement bans so as to avoid negative reactions from customers.

“In accordance with their drought plans, water companies across the country have rightly taken action to mitigate the effects of this prolonged dry weather as pressure has increased on water resources and environment.”

The Guardian

Taxpayers count the cost of Bulb Energy bailout

The taxpayer bailout of the failed energy supplier Bulb is on course to cost more than if the company had been immediately broken up by Ofgem, analysis by The Telegraph shows.

Bulb collapsed in November after failing to buy energy far enough in advance, leaving it exposed to rocketing wholesale prices.

It subsequently became the first supplier to be put into “special administration” after Ofgem, the industry watchdog, warned that doing so was “essential”.

Keeping the company going cost taxpayers £1.2bn last financial year, according to the Office for Budget Responsibility, and could cost another £1bn more this year.

Meanwhile, it has been reported that the Government could sell Bulb to Octopus Energy, the only bidder, reportedly for as little as £100m – putting the public purse on course for overall costs of more than £2bn.

This is more than Ofgem predicted it would cost consumers through their energy bills if the company had instead been allowed to fail through the so-called supplier of last resort mechanism (SOLR), analysis by the Telegraph shows.

In papers submitted for Bulb’s administration, Ofgem said following the SOLR process, where Bulb’s customers would have been transferred to other energy companies, would have cost £1.28bn in total.

After putting Bulb up for sale, the Government has received a bid for the company from rival Octopus Energy and is expected to make a decision within weeks.

Ofgem argued in court that allowing Bulb to collapse through the SOLR process would have been risky and could have left customers without power.

It said that attempting to transfer the firm’s 1.6 million customers to another supplier would have been complex and could have resulted in people with prepayment metres being temporarily unable to top up and receive power.

In another headache, it warned that the financial burden of taking on so many customers was so big that it could have tipped the recipient into collapse as well before they had received compensation for doing so.

Companies that accept customers through SOLR are repaid using levies on energy bills which are spread across all households.

In its submission to an insolvency court in November, Ofgem said: “The authority is of the view that the company is of such a size that it cannot be confident that a SOLR would be able successfully to manage the transition of customers and a SOLR direction would not precipitate another, larger [energy company] failure in due course.”

Martin Young, an energy analyst at Investec, said that whatever the ultimate cost of the Bulb bailout, consumers would end up paying – either through their bills or general taxation

The Telegraph

Serious consequences for not paying energy bills, warns UK charities

UK charities are warning people of the severe consequences of not paying their energy bills, as a campaign to stop payments from October gains momentum.

The Don’t Pay UK group, which is demanding a reduction of bills to an affordable level, has reportedly gathered support from 80,000 people who intend to cancel their direct debit payments from 1 October, when the regulator raises the energy price cap, the maximum amount suppliers are allowed to charge.

Analysts are forecasting that the average household bill will jump above £3,300 a year, from £1,971 in April.

The group says it will only take action if one million people sign up to its “mass non-payment strike of energy bills”.

Gas and electricity bills are classed as priority bills, which means there can be severe consequences for missing or being late on a payment, said the charity Stepchange. If people don’t pay them, their supplier can collect the debt using a debt collection agency. They can also get a court warrant to enter people’s homes to fit a prepayment card meter.

“Any arrears will be added to the meter and a set amount will be deducted each week. This means you must pay the arrears at a set weekly amount or lose the supply. Your supplier can also remove the meter and cut off your supply, but fortunately this is incredibly rare,” said Richard Lane, director of external affairs at Stepchange.

“If you’ve fallen behind with your household bills, and are worried about how you will pay, it’s important not to wait to get help. Contact your supplier to let them know you’re struggling, they may be able to offer support and inform you about any available grants to pay off a utility bill, or negotiate an affordable payment plan.”

Citizens Advice said there were some safeguards for customers, but they were still vulnerable to higher charges after a refusal to pay.

“Your supplier can’t make you move to prepayment if it wouldn’t be safe or practical; for instance, if an illness or disability means you’d be at risk if your gas or electricity was cut off. Your supplier also needs to follow clear guidance and make sure they’ve given you notice, given you time to pay any debts and offered you alternatives to being moved on to a prepayment meter.”

The charity said if customers fail to strike an agreement with a supplier to pay off an energy debt, the supplier can apply to a court for a warrant to enter their home to disconnect their supply.

The charity urged people to contact their supplier to try to come to an agreement to clear their debt before a hearing takes place.

If people have owed money to their energy supplier for a while, the energy company might pass their debt over to a debt collection agency.

Debt collectors, unlike bailiffs, don’t have any legal powers but they are specialists at recovering debts. If this happens, Citizens Advice urges people to contact their supplier or get advice from a third party including its own advisers.

“If you don’t repay your debt, then additional interest can be added to the amount that you owe,” it said.

If customers continue to not pay their bills, the energy supplier can take them to court to get a county court judgment. If the supplier is successful in court, it can ask a bailiff to call at a customer’s home to collect the debt. A bailiff, however, cannot force entry to a customer’s home.

Households landed with £280m bill for the mass collapse of energy suppliers

Britain’s largest electricity distributor has passed on £280 million in higher prices to consumers to cover the cost of a wave of failed energy suppliers.

UK Power Networks, controlled by the Hong Kong billionaire Sir Li Ka-shing, said it had received claims totalling that amount from suppliers taking on customers as about 30 rivals have collapsed over the past year amid soaring gas prices.

Energy suppliers that ensure continuity of supply in these cases can claim back costs from the distribution network operators (DNOs), including UK Power Networks, which operate the power lines and cables that connect homes to electricity. The process is called the “supplier of last resort”.

UK Power Networks, which delivers power to 8.3 million homes and businesses across London, the east and the southeast of England, was given the green light by regulator Ofgem to pass most of the £280 million in claims onto customers through an increase in tariffs, which came into effect in April.

The hike in tariffs is revealed in the company’s annual accounts for the year to March 2022, which also show that it generated £1.8 billion in turnover and £531 million in pre-tax profits. It also paid a £217 million dividend to its owner

It comes as households face the prospect of bills as high as £500 a month over the winter, once the energy price cap is lifted in October.

Last month, Li Ka-shing abandoned a £15 billion sale of UK Power Networks to a consortium including private equity giant KKR and Australia’s Macquarie after trying to lift the price on the back of rising inflation. The consortium decided the asking price was too high.

There are six DNOs across the country, which were formed during the privatisation of the industry under Margaret Thatcher.

UK Power Networks said it was “very conscious of the increased energy prices impacting customers” and said its costs were falling as a percentage of electricity bills

A spokesman for industry body the Energy Networks Association said: “Network costs have remained broadly flat since 2015. Any increase in network charges this coming year is predominantly caused by recovering the significant costs of failed energy suppliers.

“Industry regulations require network operators to recover these costs through increases in their portion of the bill and pass them straight on to the supplier of last resort. This takes place on a ‘pass-through’ basis without profiting.”

With 1.6 million customers, the failed supplier Bulb was too large to be passed on to a rival and so went through a separate process known as “special administration”, whereby the taxpayer funds the running costs until a permanent solution is found. It is unclear yet how this bailout will be paid for, but it could be added onto bills. Bulb’s collapse could cost the taxpayer up to £3 billion.

The Times

Energy companies urge UK to detoxify gas exports to EU

Energy companies have urged the UK to take “urgent” action over the amount of “toxic” and “hazardous” contaminants in the gas it is processing for export to the EU. They warned the problem could force critical subsea pipelines to be shut down this winter as mainland Europe struggles to replace the gas it usually buys from Russia.

The UK has become a vital gas bridge to the EU since Russia invaded Ukraine in February, leaving the bloc scrambling to secure alternative supplies. EU countries are urgently trying to fill up their gas storage facilities amid fears that Russia could cut off supplies entirely.

To help these efforts, the UK has been processing large volumes of liquefied natural gas arriving at its ports from countries including the US and Qatar. This is then moved through Britain’s energy system before it is exported via subsea pipelines from Bacton in Norfolk to Belgium and the Netherlands. But several energy companies warned that in recent months gas delivered to UK terminals has persistently been “contaminated” with high levels of materials that are often “radioactive” and can burn when they come into contact with the air.

Removing the materials has resulted in disruption that has cost gas traders an estimated £270mn so far this year and could force maintenance shutdowns if the situation deteriorates, said the businesses. These companies include a group majority owned by Belgian infrastructure giant Fluxys, Gazprom’s former trading arm of which the German government took control this year and rebranded Securing Energy for Europe, and French utility EDF.

They have called on National Grid, which oversees Britain’s gas system, to take “urgent” action to address the problem. Britain has been maximising exports to the EU this summer because in winter it relies on gas flowing back from mainland Europe, which has superior storage facilities, to meet demand at peak times. National Grid has also argued that if EU storage facilities are not filled enough this summer, pressure to continue sending gas from Britain will be “increased and sustained” during the winter. This could affect the UK’s security of supply. National Grid is seeking approval from UK energy regulator Ofgem to temporarily increase the maximum possible volume of gas that can be exported to mainland Europe via the pipeline to the Netherlands.

But several energy companies oppose the move until the problem with excess hazardous materials is resolved. Interconnector Limited, a company majority owned by Fluxys which operates the gas pipeline between Britain and Belgium, said it was “very surprised” National Grid wanted to increase flows further, given supplies delivered to Bacton this year have “consistently” been contaminated by “solids and liquids” that have constrained its operations and caused two shutdowns for repairs.

The solids include “hazardous”, “toxic”, “radioactive” and “pyrophoric” materials, said Interconnector Limited in written evidence to an expert panel that met last week to examine National Grid’s proposal. Increasing gas volumes further would mean the problem is “highly likely to be exacerbated… leading to increased risk of disruption to cross-border flows risking both European and GB security of supply”, added Interconnector Limited.

EDF said in its written evidence that the problem has harmed the “efficiency and effectiveness of the interconnected GB-EU gas market”.  Despite this, the expert panel recommended Ofgem approve National Grid’s request. Recommended Oleg Ustenko The west’s phantom energy sanctions fuel Russia’s war machine Senior energy industry executives told the Financial Times it was normal for some unwanted solids, often referred to as dust in the sector, to be delivered alongside gas but since April it had been arriving in never before seen quantities.

National Grid said the “presence of dust” in Britain’s national gas transmission system was an “historic and known issue and is something that we are continually monitoring”. It said “given [that] gas flows to the continent are much higher than those observed in a typical summer due to the important role we are playing in supporting the EU with gas supplies”, it was “not unexpected” that Interconnector Limited was having to carry out more maintenance work such as changing filters to capture hazardous materials.

Financial Times

Why the ‘battery of Europe’ threatens to exacerbate Britain’s winter energy crisis

Perched on the edge of Lake Suldalsvatnet, few Britons will have heard of the Kvilldal power station.

Yet this hydroelectric plant – Norway’s largest, with capacity to power 1.7m homes – may soon play a pivotal role in keeping their lights on.

The site is one being relied on by the National Grid to provide power when the electricity network is most stretched this winter.

It is directly linked to the UK via a 450-mile interconnector that travels through underground tunnels, into the great Bokna Fjord and along the bed of the North Sea, before resurfacing in Blyth.

According to the National Grid, it allows us to tap clean power on demand when the wind isn’t blowing and our offshore turbines are standing idle.

But this link – and others between Norway and its neighbours – is fast becoming a toxic issue for politicians in Oslo as its electricity prices rocket.

Norway’s energy troubles do not stem from a dependence on Russian natural gas. An abundance of mountain plateaus, natural lakes and fjords has allowed it to generate almost all of its electricity through hydropower for decades, backed up by small amounts of gas and wind power generation.

It is also the third largest exporter of natural gas in the world, behind only Russia and Qatar, leading some to describe Norway as the “battery of Europe”.

Now, however, as Europe faces an energy crisis in the wake of Putin’s invasion, foreign demand for Norway’s power is having a stark impact on its consumers.

As electricity export prices increase, so have its domestic tariffs – to record-breaking levels this summer.

Morten Frisch, a Norwegian energy consultant based in the UK, says prices this year have typically been 10 to 20 times higher than previously, adding: “This is not something people can afford to pay”.

The problem is exacerbating regional disparities, because most of Norway’s interconnectors are based in the south.

While electricity can cost €2 per megawatt (£1.69) for households in northern areas, prices in south western Norway can be €550 per megawatt, according to Frisch.

The toll on Norway is not just financial, however. It relies on reservoirs to feed its hydroelectric plants, mostly refilled by rain or melting snow. Following a dry spell during the spring and summer, the reservoirs were last month reduced to a 20-year low of 46pc of capacity in the south west.

“This is not something you can just fill up at will,” Frisch explains. “When they run dry, they run dry, and it’s likely to take a minimum of three months, possibly six months, before they can be refilled by rain.

For Oslo’s government, this has made the subject of foreign power exports increasingly thorny. Some campaigners have called for Norway to cut itself off from Europe.

A Facebook group named Vi som krever billigere strøm (meaning ‘we who demand cheaper electricity’) has more than 600,000 members. Users complain of a “price contagion” spreading from the likes of Britain and Germany and call on Prime Minister Jonas Gahr Støre to take action.

Støre has argued that staying connected to Europe benefits Norway and means it can tap foreign power if needed, telling the Aftenposten newspaper: “There is reciprocity in this”.

Yet there is pressure for a rethink. The country’s parliament could be recalled as soon as this week to discuss fresh measures to tackle the crisis.

Ministers have discussed beefing up government support to consumers, and floated the possibility of power export restrictions. Støre’s minority Labour government is currently propped up by the Central party and relies on opposition parties to pass laws.

Last week, Terje Aasland, the oil and energy minister, told the Verdens Gang newspaper that “concrete measures” were being devised to “limit exports when the degree of hydroelectric water reservoir filling is below a certain level.

“When there is little water in the hydroelectric water reservoirs, Norway will come first”.

It is likely to prompt further questions for the National Grid about whether Britain can rely upon Norway.

The Grid claims there will be plenty of electricity available this winter, with a forecast buffer capacity of four gigawatts, or 6.7pc. However, this is based on expectations that the UK can draw on 5.7 gigawatts of power from Europe, or roughly 10pc of demand at peak times. That includes 1.4 gigawatts from Norway.

The Telegraph

Plan to cut water waste: spend 60 seconds less in the shower 

An official target has been set for every person to cut daily water consumption by a quarter by 2050, from 145 litres to 110 litres a day.

The government will also “encourage” local authorities to adopt a tighter building standard of 110 litres a person per day in new homes, and intends to consult on mandatory water efficiency labels on domestic and business products.

The figure was set out by Defra in guidance to Ofwat, the water regulator. A saving of about 30 litres is the equivalent of three dishwasher cycles on eco mode, or six flushes of a modern lavatory.

Parts of the country had the driest July since records began. Hosepipe bans were imposed in Hampshire and the Isle of Wight last week, with Kent and Sussex due to follow on Friday, and much of southwest Wales on August 19.

Regardless of when the dry spell ends, the water companies have their eye on more profound changes to our way of life.

The industry forecasts that the UK will need an extra four billion litres per day by 2050. Water companies are planning substantial updates to infrastructure, and anticipating significant costs and planning challenges of building more reservoirs and connectors to pipe water from wetter parts of the country.

Havant Thicket, the first large new reservoir in England since Carsington was opened in the Peak District in 1992, will store 8.7 billion litres in East Hampshire. However, it will not be ready until 2029 and is facing local opposition.

As one industry source put it: “It might be politically unpopular but, at least in the short term, it’s a simple choice between spending a billion pounds on infrastructure or asking people to spend a minute less under their shower.”

Like the goal for carbon net zero, the deadline for achieving the reduction in water consumption is 2050, conveniently far off for policymakers and investors.

Although the government has taken steps to tackle climate change — such as banning sales of new petrol and diesel cars from 2030 — there appears to be a lack of urgency in responding to water shortages on what was a rain-soaked island.

The National Infrastructure Commission (NIC) has recommended mandatory water metering and a requirement for all new-build homes to conform to the 110-litre target.

Homes with standard water meters typically use 15% less water, and those with smart meters 17% less.

Instead, the government has so far opted for weaker measures, permitting companies to introduce compulsory metering in areas of “serious water stress” but only where this is cost effective and has the support of customers.

The 110-litre target was set out by the Department for Environment, Food and Rural Affairs in guidance to Ofwat, the water regulator.

It is not enough for Professor Jim Hall, a commissioner of the NIC, who this weekend urged the government to step up. “People can’t be expected to do all the heavy lifting on this through personal choice. Our homes and the devices within them need to be designed to make it easy for us to use less water.

The Times

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