Weekend press: Ofgem faces questions on advice about energy brokers’ hidden fees

In our latest review of sector coverage in the national media, the energy regulator has been accused of issuing inaccurate advice to small businesses about undisclosed fees paid to energy brokers. Meanwhile Orsted is posed to ditch state subsidies for Hornsea 3 in favour of private power deals and Storm Ciaran has caused further disruption to water supplies.

Ofgem faces questions on advice about energy brokers’ hidden fees

The energy regulator has come under fire after issuing inaccurate advice to small businesses about their legal rights.

The row relates to whether or not businesses can seek to claim back millions of pounds in fees paid to energy brokers if they were not disclosed.

Ofgem published a “scam” alert this year telling businesses that they could not do so but has now removed that warning and admitted that businesses may indeed be able to bring legal action.

Many small businesses arrange their energy deals through brokers, third-party intermediaries (TPIs) that liaise with suppliers on their behalf over potential tariffs. Sometimes brokers charge the customers a fee directly for this service but in other cases the broker is paid commission by the winning supplier, which then levies a charge on the customer’s bill.

In October last year Ofgem introduced new rules to ensure that microbusinesses are fully informed about such commission payments by their supplier at the time of taking out a deal.

The law firm Harcus Parker argues, however, that the payments should always have been disclosed. It is pursuing a class action on behalf of businesses seeking “significant compensation from energy companies” on the basis that they paid inflated bills for years.

Ofgem published a warning on its website this year telling microbusinesses that they could not “claim back the cost of previous commissions paid if they were part of a fair and legally binding contract”. Following a complaint from Harcus Parker Ofgem’s website advises microbusinesses that they “may be able to claim back the cost of previous undisclosed broker / TPI commissions through litigation”.

An Ofgem spokesman said: “After reports of claims management companies making misleading statements about Ofgem and its existing powers regarding energy brokers, we published a warning on our website. Following further feedback this was updated.

“We have asked government to introduce regulation for energy brokers as policing this market is not currently in Ofgem’s remit. In the interim we have introduced more protections for small businesses including requiring contracts to spell out what is being paid to brokers and making suppliers work with energy brokers who have signed up with a redress scheme.”

The Times

Scramble to keep UK wind farm project alive as developer mulls private power deals

The developer behind one of Britain’s largest offshore wind farms is exploring ditching state subsidies in favour of private power deals as it scrambles to boost the project’s finances.

Ørsted has confirmed it may give up some government support that would apply to Hornsea 3, off the coast of Yorkshire, amid concerns that the subsidies it has been awarded are too low.

Instead, a spokesman said the company may seek to sell 25pc of the scheme’s power on a so-called merchant basis – where it receives no state support but can potentially reap bigger returns.

This would amount to selling about 700 megawatts of the wind farm’s planned 2.8 gigawatt (GW) output, a total which is enough to power three million homes.

The move comes as Ørsted’s bosses scramble to boost the viability of the scheme ahead of a final investment decision, expected by the end of this year.

The offshore wind industry has been hammered by rising costs for materials and equipment, as well as higher interest rates.

There are concerns that past subsidies awarded by the Government are now not generous enough to support projects given current costs.

Since Hornsea 3’s Contracts for Difference and others were agreed, the offshore wind industry has been buffeted by surging costs and there are fears that some projects will be loss-making for years into the future.

Some schemes have already been put on hold, including Vattenfall’s Norfolk Boreas project.

On Friday, bosses at Ørsted told financial analysts they were examining an option to pass over 25pc of the CfD contract so the company would instead be free to sell power from the scheme for a higher market rate.

This could potentially boost returns from the scheme – assuming the company can secure better prices for the power privately than what it is guaranteed under Hornsea 3’s CfD.

Ørsted, the world’s biggest offshore wind developer, has insisted it intends to press ahead with Hornsea 3 in “all scenarios” but has yet to take a final decision.

The project is scheduled to begin generating in 2026 and has been awarded a subsidy deal worth about £45 per megawatt hour in today’s prices – less than what was offered in the most recent subsidy auction.

The pool of potential buyers for the 700 megawatts of power on offer is likely to be confined to heavyweight companies with big electricity demands.

Ørsted has previously struck power purchase agreements with Amazon for undisclosed rates, providing about 360 megawatts of power to the internet shopping behemoth, which also runs massive data centres for its Amazon Web Services division. The deals sourced power from the company’s onshore wind farms in Scotland.

The Daily Telegraph

South West Water to reward customers who cut use with lower bills

Consumers in Cornwall and Devon will be offered cheaper bills in return for cutting their water use as the region struggles to cope with a rise in the number of new residents who work from home.

From next year, South West Water (SWW) – which was fined in April for dumping sewage illegally into rivers and the sea – will offer residents new tariffs designed to encourage reducing water use amid concerns about the strain caused by increased numbers of tourists and home workers.

The company, owned by Pennon Group, will trial several new offers, including an “environmental tariff” that will “reflect the higher cost of peak summer demand” but offer discounts over the winter when water is less scarce.

Residents in the south-west were subject to a hosepipe ban that lasted for more than a year and was lifted only in September as reservoirs were replenished. SWW data shows its customers’ household consumption has risen nearly 13%, from 312.4m litres a day in 2019-20 to 352m litres a day in 2022-23.

SWW said the population had swelled by 300,000 over the past 10 years and was expected to grow by a further 530,000 by 2050. “The assumption is this has been driven by retirees or, following the pandemic, those able to work from home all or some of the time,” it said.

The boom in working from home kickstarted by Covid lockdowns brought fresh impetus to a trend for Britons leaving cities in favour of working remotely in the countryside or coastal locations, notably in Devon and Cornwall.

The counties were also popular holiday destinations when UK-based trips dominated the travel industry during the pandemic. However, both trends exacerbated tensions between second homeowners and day trippers, and permanent residents of the south-west.

SWW estimates that the number of second homes is as high as 40% in tourist hotspots, and typically 10% in other coastal areas. It says the population increases from 3.5 million to an estimated 10 million in the region in the summer.

In a recent submission to the regulator Ofwat, Pennon said: “Customers have told us they feel they are paying a premium for the high peak summer demand we experience when visitors come into the area.

Most SWW customers use water meters, rather than paying on fixed tariffs. SWW’s planned “eco tariffs” would reward low consumption levels with discounted tariffs. Those on social tariffs, which offer lower rates for vulnerable customers, will not be included in the trials.

The Guardian

Thousands without water after Storm Ciarán disrupts Surrey treatment works

Thousands of people have been left without water after Storm Ciarán caused problems at a treatment works in Surrey, Thames Water has said.

A major incident was declared as at least 13,500 homes in Guildford, Godalming and the surrounding areas were left without water or with low pressure by 2.50pm on Sunday, while a further 6,500 were expected to lose supply later in the day.

Thames Water said in a statement: “We’re really sorry about the continuing water supply problems in GU1, GU2, GU3, GU5, GU6, GU7 and GU8. This follows issues caused by Storm Ciarán at Shalford water treatment works.”

The company added: “Our engineers remain on site, working hard to get things back to normal. We’re also using tankers to pump water into our supply network. We know how worrying and inconvenient this is and thank you for your patience.”

Jeremy Hunt, the chancellor and MP for South West Surrey, said in a social media post that he was “very concerned” about the situation and would talk to a Thames Water executive.

Surrey county council (SCC) told those affected to head to water stations set up by Thames Water at the crown court in Godalming but they were reportedly faced with long queues, the PA news agency reported. Bottled water stations were also set up at Artington park and ride in Guildford.

The Guardian

Sunak to use king’s speech to announce new system to award oil and gas licences

Rishi Sunak will this week announce legislation for a new annual system for awarding oil and gas licences as part of a highly political king’s speech which the Conservatives hope will open up clear dividing lines with Labour.

The government said the plans would protect thousands of jobs and bolster energy security, reducing the UK’s reliance on imports from hostile foreign regimes such as Russia, even though the UK has committed to move away from fossil fuels.

The prime minister said the move would help Britain reach its climate commitment of net zero carbon emissions by 2050 in a “proportionate and realistic” way, with the new licenses contingent on specific tests he said would support the transition to net zero.

Sunak has already watered down the government’s climate targets, pushing back the deadline for selling new petrol and diesel cars and the phasing out of gas boilers, prompting furious condemnation from the automobile and energy industries.

The proposed new legislation could set a political trap for Labour, which has said it would block new domestic exploration licences if it wins power, proposing instead to invest heavily in renewable sources such as wind and also in nuclear power.

Ed Miliband, the shadow climate secretary, said the plan to mandate annual oil and gas licensing was unnecessary, suggesting the government was more focused on creating dividing lines over the green agenda ahead of the next election.

“This proposed bill is a stunt which does nothing to lower bills or deliver energy security. We already have regular North Sea oil and gas licensing in Britain, and it is precisely our dependence on fossil fuels that has led to the worst cost of living crisis in generations.

“All this stunt of a bill tells you is that this is a government that is bankrupt of any ideas, and Rishi Sunak is continuing with his retreat from net zero as part of a desperate political strategy.

“No wonder we see consternation from so many leading businesses, and even figures in his own party, who know he is undermining our energy security, damaging our economy and risking jobs.”

Under the plans, the North Sea Transition Authority (NSTA) will invite applications for new production license on an annual basis, which the government said would provide certainty and confidence to investors and industry.

Each yearly licensing round would only take place if key tests are met that support the transition to net zero. The first test is that the UK must be projected to import more oil and gas from other countries than it produces at home.

The second is that the carbon emissions associated with the production of UK gas are lower than the equivalent emissions from imported liquefied natural gas. If both these tests are met, the NSTA will be required to invite applications for new licences.

The Guardian

AI technology trialled to predict power outages caused by storms

A power company is trialling the use of artificial intelligence (AI) to predict faults in the electricity network so it can restore power to homes faster.

ScottishPower Energy Networks (SPEN) is using AI technology to better pinpoint potential faults caused by severe weather and ensure engineers and equipment are mobilised to tackle problems when – and even before – they occur.

The firm, which serves more than three million homes and businesses across the UK, has described the £5 million Predict4Resilience project as “revolutionary” as it will use AI to predict where outages could occur up to a week in advance.

The technology will use historic weather and fault data along with network asset and landscape information to develop machine learning models.

This will be combined with real-time weather forecasting to inform control room staff where bad weather will hit and what kind of damage to expect with improved accuracy.

The trial, which is believed to be a UK first, comes just a fortnight after Storm Babet knocked out supplies to hundreds of homes across Scotland.

Guy Jefferson, chief operating officer at SPEN, said: “Ahead of a severe weather event we mobilise hundreds of engineers, vehicles and generators, alongside thousands of pieces of other materials, so we are ready to restore power as quickly and as safely as possible.

“We know the disruption severe weather can bring to our customers and we are constantly investing in our network and investigating new technologies that could be used to keep this disruption to a minimum.

“Projects like Predict4Resilience offer us another tool to help inform our decision making during a storm and help to reduce the time it takes us to restore power, minimising the impact of severe weather on our customers and communities even further.

“Through collaboration with Scottish and Southern Electricity Networks (SSEN) Distribution to expand our testing area, the trial phase of this project will provide us with robust learnings to meet our ambition of rolling this technology out across the UK.”

The Standard

Energy Ombudsman: Complaints leap by 84% in one year

The Energy Ombudsman saw a huge rise in complaints between April to June – up 84% on the same period in 2022.

Of the 36,823 disputes, the most common concerned gas or electricity use, account balances and meter readings.

A customer can only escalate a complaint to the Ombudsman if their supplier has not fixed an issue after eight weeks or says it is not fixable.

The ombudsman said “the start of the energy crisis [in 2022]” and the cost of living may be behind the rise.

The 36,823 complaints about energy companies accepted by the Ombudsman between April and June is the highest figure for a quarter on record.

On its website, the watchdog states it “may only see a small fraction of complaints made about a supplier”.

The average award given to customers has also rocketed – from £40 for billing complaints in April to June last year, to £126 this year.

The average award for smart meter complaints has risen from £33 to £100.

BBC News

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.