Weekend press round-up: Ofwat ‘politicised’; energy companies owe customers millions

In this weekend's round up, Ofwat is accused by industry investors of being politicised; energy suppliers are under fire for reportedly using customer's money to remain afloat; and consumers are advised on how to get their money back.

Energy companies owe us millions

Suppliers are using money from people’s accounts that are in credit to keep themselves afloat.

A multi-millionaire consumer champion is accusing cash-strapped energy companies of letting their customers overpay on their bills, with no intention of paying the money back.

Richard Mason, 56, who made his fortune by co-founding the Money Supermarket price comparison site, says he is owed more than £1,500 by one failed supplier.

Mason’s revelation comes in the same week that Toto Energy went bust, the 15th small energy supplier to do so in the past two years. Collectively they owed tens of millions of pounds to 1.2 million customers.

It has triggered fresh criticism of the regulator’s policy to allow suppliers to set up in the industry with inadequate financial checks.

Mason says he is owed £1,556.93, which he built up in credit by overpaying for his energy consumption while he was a customer of Solarplicity, a renewable energy supplier. When he asked for the money to be returned in February, he says that the company stalled for seven months before going out of business in August, owing its customers £3.5 million.

Mason and 7,500 other Solarplicity customers were automatically transferred by the regulator Ofgem to EDF, one of the Big Six — British Gas, EDF, Eon, Npower, Scottish Power and SSE — which must pay back everything the bankrupt company owes.

However, EDF says it cannot give Mason a timescale for the repayment because it is waiting on Solarplicity to provide the relevant paperwork.

“What I didn’t know then, but do now, was that Solarplicity were obviously in a position where they could not reduce my payments, because they were in a serious financial situation, and clearly none of the other customers would have known either,” he says.

Mason, from Rhos in north Wales, says that he does not need the money (he sold his shares in Money Supermarket in 2008 after it floated for £840 million), but is pursuing it as a matter of principle to illustrate the broken energy market, and will donate the proceeds to charity.

Times Money revealed concerns over the sustainability of some small energy companies in March last year, when experts heavily criticised Ofgem for being too willing to pass small energy companies as fit.

This week, after years of pressure, the regulator finally announced plans for tougher checks and balances on suppliers. Under the new rules an analysis will be made on whether suppliers are financially healthy enough to take on new customers; if not, they could be prevented from doing so. However, within a day of the regulations being announced Toto Energy announced that it had gone into liquidation, throwing 134,000 customers into limbo.

Mason says that Ofgem’s plans were too little too late. “It’s always the way with regulators in this country. After the horse has bolted we shut the stable door, but it’s too late by then.”

Ofgem has spent much of the past decade encouraging new companies into the market to break the dominance of the Big Six suppliers. While it has boosted competition and improved customer switching rates, there were concerns that regulation was too lax.

Joe Malinowski, the founder of Energy Shop, a price comparison site, says that several other smaller companies that failed, including Iresa (July 2018, 100,000 customers) and Economy Energy (January, 235,000 customers), were accused of dramatically increasing customers’ direct-debit payments just before they went out of business in an attempt to raise urgent cash. Iresa customers reported direct debits increasing by as much as 20 per cent and being charged one-off payments.

There are about 60 energy suppliers trading. Scott Byrom of the Energy Shop says that Ofgem’s decision to allow so many to flood the market, and then fail, has made consumers suspicious of new traders, making them stick with larger, more expensive companies. “Consumer choice and new market entrants is a positive thing, but greater control and monitoring is needed,” he says.

The Times

Ofwat is ‘politicised’, say water industry investors

Backers accuse regulator of bowing to political pressure over spending demands

Top investors in the water industry have complained to the Treasury that the regulator Ofwat is being politicised and warned of a flood of appeals against its financial demands.

International investors that control suppliers including Anglian, Yorkshire, Affinity, South East and South Staffs led a delegation this month ahead of a crunch ruling on prices by Ofwat, due in December. They are reeling from the toughest draft settlement from the regulator in years and fearful of Labour’s pledge to renationalise the sector at a big discount to market value.

After years of taking huge dividends from water companies and piling debt onto them, while paying minimal corporation tax and overseeing scandals such as sewage spills and water leaks, utility investors have seen the industry and political environment turn toxic.

Ofwat, chaired by former Anglian Water boss Jonson Cox, stunned the sector in July when it rejected the spending plans of all but three companies and sent the other 14 back to the drawing board, demanding more efficiency, faster paydown of debt and better customer service. It will publish its final ruling on their 2020-25 spending plans in December.

The meeting on October 14 is believed to have included blue-chip investors such as German insurer Allianz, Singapore sovereign wealth fund GIC, Deutsche Bank’s wealth division and Australia’s IFM Investors. Among the issues raised was Ofwat’s independence and the dangers of it reacting to political pressure.

Cox has been on a crusade to clean up the sector. In an interview last year, Cox told The Sunday Times: “This industry still doesn’t accept that customers should be at the heart of this business. We are unwinding one of the last bits of the pre-crash bonanza: buying an asset and gearing it up.”

Investors also asked senior mandarins whether the Competition and Markets Authority had the resources to deal with simultaneous appeals against Ofwat’s financial stipulations. At least five suppliers are believed to considering appeals.

The funds called on the Treasury to assess the financial resilience of the sector, after companies including Thames and Northumbrian complained that Ofwat’s demands were “unfinanceable”.

Global investors have ploughed billions of pounds into former state-owned companies since the privatisation wave of the 1980s and 1990s, yet are increasingly reassessing whether the UK is still an attractive place to park their cash.

Ultra-low interest rates and the need for returns inflated asset values and led to a bidding war for infrastructure companies. However, the appetite for water companies has cooled over the past two years. The Sunday Times revealed in April that Labour planned to renationalise the industry at a big discount to market value, making deductions for “asset-stripping since privatisation”.

That and Ofwat’s clampdown have spooked local authority pension funds, which have belatedly begun pouring cash into infrastructure. GLIL, which invests the pensions of council staff, was among the attendees at the Treasury meeting.

Ofwat said: “Our decision-making is independent from government and based on delivering the very best for customers. Investors have always made clear they value the independence of the regulatory regime.”

The Sunday Times

Wait eight seconds longer for your kettle – and cut your carbon bill

Electricity North West says plans to lower its voltage could cut emissions by 10 per cent and save customers £60 a year

From Cheshire to Cumbria, thousands of people may soon be waiting a little longer for kettles to boil. A small sacrifice, perhaps, for cheaper energy.

Under plans to lower the voltage of energy grids across the north-west of England, about 45,000 homes can expect to shave £60 from their annual electricity bills. The scheme could save millions of pounds on energy a year and cut carbon emissions without people noticing any difference, says the local network company.

During “Smart Street” trials over four years, engineers for Electricity North West found they could carefully lower the grid’s voltage by enough to save on energy without noticeably slowing household appliances or causing light bulbs to flicker.

“Nobody noticed the changes until they were given their bill and suddenly found out they’d been using less electricity,” said Steve Cox, the company’s engineering director.

“If we reduced the voltage by a few percent, then a full kettle might take eight seconds longer to boil. If we boost the voltage, it might boil eight seconds faster. But within the typical time it takes to boil a kettle, say two minutes, this really isn’t noticeable.”

“Voltage control” is well established in some states in the US, but Electricity North West will be the first network in the UK to reduce its voltage towards the lower end of the normal 220V to 240V range.

The company will install highly sensitive devices that pinpoint the “voltage sweet spot” at which appliances use as little energy as possible.

“It’s a bit like a car on the motorway. Your car could run at anywhere between 10mph to 90mph, but it operates most efficiently at 50mph,” Cox said.

“We monitor how much energy our customers are using in real time, and how much power is flowing through the network, and then we regulate the voltage down to the most efficient level so that appliances keep operating normally but consume less energy,” he said.

The savings could provide a new carbon-cutting frontier for the UK as it moves towards its 2050 target to create a carbon-neutral economy. By being more energy efficient, Electricity North West could cut its emissions by up to 10%, saving 143,860 tonnes of carbon by 2050 – the equivalent of taking 2,570 polluting cars off the road every year.

The lower voltage could also leave more capacity on the energy grid to connect new sources of clean electricity, such as small-scale renewable energy projects, to help meet the rising demand of electric vehicles and heat pumps without adding carbon emissions to the system.

Helen Boyle, decarbonisation manager for the company, said: “Demand for electricity is set to double over the next 20 years, so we’re taking positive steps now to help the transition away from fossil fuels and make the low-carbon economy a reality.”

Cox said the company hopes to expand the trial from thousands of homes to millions in the years ahead. It is already sharing its research with other regional energy networks which may also choose to lower the voltage to save on electricity.

The Guardian

Energy giants sit on £1.5bn of your cash: How to demand a refund as suppliers use your credit balances as their bank

Now is the time to claw back any overpayments made to energy suppliers during the summer – as a new report shows the sneaky tactics some companies employ to keep hold of customers’ cash.

A study of thousands of online reviews left by customers over the past three years shows the extent of sly increases to direct debit payments and unacceptable delays in making refunds by many gas and electricity providers.

The investigation by Switchcraft, a service that automatically moves consumers to cheaper tariffs, shows that nearly a quarter of customers’ complaints related to overcharging or having direct debits increased – despite being in credit.

Some in the 3,500-strong sample saw monthly payments rise by up to 40 per cent, even though suppliers owed them money.  

In more than 50 cases, households reported direct debit increases without any prior notice – even though customers should be notified at least ten days in advance of any rise.

Alex Dickson, head of research at Switchcraft, says the practice is allowing suppliers to play ‘banker’ with customers’ money.

He says: ‘Households are being treated more like micro-lenders than energy customers. If a supplier has 10,000 customers in credit by just £20, that’s a £200,000 interest-free loan to buy energy, cover business operations or invest in further growth.’

But the sneaky loan grab is not the only reason customers should demand a refund of any credit sitting in their energy account. 

A dozen providers have gone bust in the past year. Toto Energy, which had 134,000 customers, last week became the latest casualty and further failures are expected this winter.

It is estimated that suppliers are holding on to more than £1.5 billion of customers’ cash.

If a supplier fails, credit balances are ring-fenced under rules set by regulator Ofgem. A new supplier is chosen to take responsibility for abandoned customer accounts.

But there have still been problems. Customers of Extra Energy, for example, which went into administration in November last year, waited months for a refund. 

A final bill is needed before overpayments are returned, but the last wave of final bills only hit doormats or email inboxes last month.

One customer commenting online this month says: ‘Like a lot of other customers I want my credit balance with Extra Energy returned to me. It is my money and I want it back.’

Overpayments have swelled in the past decade as automatic direct debits are now the payment method for 70 per cent of households, compared to 20 per cent in 2007 – when a lot of people would have paid on receipt of a bill.

Paying via direct debit is usually a condition for signing up to cheaper tariffs. It also suits many households – until a provider goes bust. 

As a result of recent company failures, Ofgem has announced new rules to ensure suppliers do not compromise customer service standards by growing too quickly.

Ofgem will now have the power to request an independent audit of a company’s finances that could result in a supplier being prevented from taking on new customers if they are failing existing ones. 

Companies will also be required to have ‘exit arrangements’ in place in case they fail. But the implementation of these new rules won’t happen until next year at the earliest.

Dickson adds: ‘As the retail energy market contracts and conditions get tougher for energy companies, we can expect more creative billing and more bankruptcies.

‘Consumers need to ask themselves – is it really in their best interest to have their energy account running into credit? Refunds from failed suppliers can be messy and drawn-out.’

Comparison website TheEnergyShop is aware of suppliers inflating direct debits ‘without notice or justification’ prior to bankruptcy.

A ‘winter uplift’, as it is known, is common among suppliers. Joe Malinowski, founder of TheEnergyShop adds: ‘Excessive winter uplifts of 30 per cent plus are simply another way for suppliers to hoard customers’ cash to finance their businesses. Customers may want to avoid these suppliers.’

Switchcraft’s analysis also shows 47 customers were billed by a new supplier before a single watt of energy was supplied – known as ‘advanced billing’. 

Mail on Sunday

A lightbulb moment for nuclear fusion?

Boris Johnson’s gung-ho claims may be wide of the mark, but scientists pursuing the holy grail of energy generation are taking giant steps

“They are on the verge of creating commercially viable miniature fusion reactors for sale around the world,” Boris Johnson told the Conservative party conference earlier this month – “they” apparently being UK scientists. It was, at best, a rash promise for how nuclear fusion might make the UK carbon-neutral by the middle of the century – the target recommended by the Committee on Climate Change, which advises the government. “I know they have been on the verge for some time,” Johnson hedged. “It is a pretty spacious kind of verge.” But now, he assured his audience, “we are on the verge of the verge”.

It’s a familiar and bitter joke about nuclear fusion as an energy source that, ever since it was first mooted in the 1950s, it has been 30 years away. Johnson’s comments had the extra irony that Brexit could merely add to that distance.

It’s not clear what “commercially viable miniature fusion reactors” the prime minister had in mind. There are no such things either existing or planned at the main British centre for fusion research, the Joint European Torus (JET) at Culham in Oxfordshire, which Johnson visited in August. Experiments at Jet, conducted by all partners within the 28-state Eurofusion consortium, aim to make the nuclear fusion of hydrogen – the process that powers the sun and other stars – viable for energy generation by collecting the heat released to drive turbines for electricity. When Jet is running, the temperature inside is more than 100 milion degrees celsius, making it “the hottest place in the solar system” according to Jet’s director, Ian Chapman.

Nuclear fusion is the merging of atoms. Every atom contains a very dense central blob called the nucleus, made up of particles called protons and neutrons. Atoms of different chemical elements have nuclei with different numbers of protons. If two nuclei collide at high enough energy, they can amalgamate to form a different, heavier element. It requires very high temperatures and densities: inside the sun, temperatures of 10 million degrees celsius or so enable hydrogen atoms to fuse into helium. This process releases energy, which makes the sun shine.

Today’s nuclear power plants use not fusion but nuclear fission: the splitting apart of heavy nuclei. This happens spontaneously for radioactive elements such as uranium, and it too releases energy. But both the fuel and the products may remain highly radioactive for very long times – hundreds of thousands of years – creating health hazards and waste-disposal problems. What’s more, the fission process, which involves chain reactions that induce fission, can be hard to control and shut down, as the Chernobyl and Fukushima disasters, in Ukraine and Japan, showed. Fusion is “nuclear power done right” – potentially much cleaner, safer and more efficient. “It seems too good to be true – high power density, low and manageable waste production, and no possibility of uncontrolled energy release,” says Tim Luce, chief scientist on the large international fusion project Iter, in the south of France. “But it is true!”

Since its completion in 1983, JET has been working towards the holy grail of net energy gain: extracting more from the fusion process than is put in to keep it alive. Its reactor induces fusion in a super-hot plasma of hydrogen fuel suspended by magnetic fields inside a doughnut-shaped device called a tokamak – the word is a Russian acronym, the design having first been proposed in the 1950s by Soviet physicists.

In 1997 JET set a world record for the highest ratio of energy out to energy in. But that was still just two-thirds of the break-even point where the reactor isn’t consuming energy overall. JET was always intended as an experimental facility, however, and it will eventually hand on the baton to the $20 million ITER project, on which the EU and six other nations, including the United States, Russia and China, are collaborating. The construction of ITER is now nearing completion at Cadarache, near Aix-en-Provence. It hopes to conduct its first experimental runs in 2025, and eventually to produce 500 megawatts (MW) of power – 10 times as much as is needed to operate it. “The role of ITER is to realise power-plant levels of power and gain, and to begin to address the technological needs of power plants,” says Luce.

The fuel used in these and other fusion reactors is not ordinary hydrogen – the lightest element, with a nucleus containing just one proton – but heavier hydrogen isotopes called deuterium and tritium, which also have neutrons in their nuclei. The presence of neutrons lets fusion happen under less extreme conditions of temperature and pressure. Deuterium is abundant: it makes up 0.02 pre cent of all the natural hydrogen in seawater, from which it can be extracted. But tritium is very rare and radioactive, disintegrating with a half-life of 12 and a quarter years.

Tritium can be produced directly at a fusion facility by using the neutrons released as nuclei fuse to break apart lithium atoms, so that a reactor may “breed” its own fuel. It can also be extracted from heavy (deuterium-rich) water, which is how JET gets it. But it’s costly, so deuterium-tritium fuel is only used on major test runs. Jet plans to conduct one next year – the first since the record-breaking demonstration in 1997. “We remain very optimistic that we’ll break the world record for fusion energy produced,” says Chapman. “Everyone is very excited because we haven’t done it for 20 years.” ITER, meanwhile, hopes to start using deuterium-tritium fuel in 2035.

JET won’t be jeopardised by Brexit. Chapman says that “we’ve signed a contract to operate JET to the end of 2020, whatever happens with Brexit. And we’re already talking with our European partners about an extension to the end of 2024.”

The Guardian

SUVs second biggest cause of emissions rise, figures reveal

If SUV drivers were a nation, they would rank seventh in the world for carbon emissions. Growing demand for SUVs was the second largest contributor to the increase in global CO2 emissions from 2010 to 2018, an analysis has found.

In that period, SUVs doubled their global market share from 17 per cent to 39 per cent and their annual emissions rose to more than 700 megatonnes of CO2, more than the yearly total emissions of the UK and the Netherlands combined.

No energy sector except power drove a larger increase in carbon emissions, putting SUVs ahead of heavy industry (including iron, steel, cement and aluminium), aviation and shipping.

“We were quite surprised by this result ourselves,” said Laura Cozzi, the chief energy modeller of the International Energy Agency, which produced the report.

The recent dramatic shift towards heavier SUVs has offset both efficiency improvements in smaller cars and carbon savings from electric vehicles.

As the global fleet of SUVs has grown, emissions from the vehicles have increased more than four-fold in eight years. If SUV drivers were a nation, they would rank seventh in the world for carbon emissions.

“An SUV is bigger, it’s heavier, the aerodynamics are poor, so as a result you get more CO2,” said Florent Grelier from the campaign group Transport & Environment.

T&E figures show the average mass of new cars rose 10 per cent between 2000 and 2016, which the group suggested could be down to a trend towards SUVs, heavier automatic and dual-clutch gearboxes and the inclusion of other equipment including cameras and sensors.

Grelier said the global shift towards bigger cars had been observed for a while, but the effect on emissions increases compared with other industries was surprising nonetheless.

“The problem is much bigger than we expected,” he said.

The Guardian