Weekend press round-up: EDF under scrutiny for nuclear security ‘shortfalls’

In our latest review of sector coverage in the national media, nuclear regulators step up their monitoring of EDF amid concerns about cyber security; the Labour party calls for a further backdate to the windfall tax on generators and there are fears of policy paralysis on crucial environment and net zero issues amid the turmoil in government.

EDF under scrutiny for nuclear security ‘shortfalls’

Nuclear regulators have stepped up their monitoring of French power giant EDF amid concerns about cyber security.

The UK’s Office for Nuclear Regulation (ONR) has put the company under “enhanced attention” after finding “shortfalls” in its cyber security plans, The Telegraph can reveal.

French state-owned EDF owns and runs the UK’s nuclear power fleet. It is also building the UK’s first new nuclear power station in a generation, Hinkley Point C in Somerset, with its minority Chinese partner CGN.

Cyber security is of heightened concern nationally amid Russia’s war on Ukraine. Russia has been blamed for cyber attacks which disrupted windfarms in Europe on the eve of its invasion and security officials have called on British organisations to bolster their defences.

In a blog post last week, Dr Marsha Quallo-Wright, deputy director for Private Sector Critical National Infrastructure at the National Cyber Security Centre, said “now is not the time for complacency” despite no significant cyber attacks on UK organisations since Russia’s invasion.

“The absence of successful cyber attacks doesn’t equate to a change in adversary capability or intent; indeed it may be evidence that our additional cyber defences are working effectively,” she said.

The ONR has stepped up monitoring of EDF following a string of routine inspections over the past 12 months, during which it said it “identified shortfalls in governance, risk and compliance and certain technical controls”.

EDF said the shortfalls related to cyber security. A spokesman added: “EDF works in very close partnership with the National Cyber Security Centre and some joint studies with them identified some areas for improvement, such as in risk awareness.

“We are constantly striving to improve security and work with various bodies, including the ONR, to achieve this. The cyber threat is a constantly evolving area and we want to stay ahead of the threat.”

The ONR has three levels of regulatory attention: routine, enhanced, and significantly enhanced. Enhanced attention is not a form of enforcement action, but means the company will get more focus.

Other nuclear companies and sites are also subject to enhanced attention for various reasons.

The ONR said: “On the grounds of national security and protecting critical national infrastructure, we are not able to go into detail on security shortfalls as such information can be exploited by potential adversaries.

“But it is important to stress that security on nuclear sites is designed using defence in depth, so individual shortfalls in specific areas have no effect on the overall security regime.”

EDF said the ONR had “identified an increased potential for risks due to the upgrade of complex IT systems and changes in the organisation of our internal security department”.

A spokesman added: “It has simply chosen to subject these areas to greater scrutiny over the next year as part of its ongoing inspection regime.”

The ONR’s findings “do not relate in any way to nuclear safety and the safe operation of EDF’s UK reactors,” it continued.

The Daily Telegraph

Banks line up for French state buyout of EDF

The French government is working with Goldman Sachs and Société Générale as it explores how to take full control of utility EDF, with a tender offer to minority shareholders emerging as the preferred option, according to people familiar with the matter.

The government this week announced it would take back the 16 per cent of EDF it does not already own, saying the move would bolster the power group’s finances as it gears up for more investments in costly nuclear reactors, and allow France to gain even greater control over its electricity production as Europe is rocked by an energy crisis.

The government has yet to detail how it will assume full ownership of the indebted company. A tender offer to EDF’s shareholders, rather than trying to steer a nationalisation bill through parliament, is shaping up as the swiftest and most viable plan, according to three people familiar with the matter.

“There’s a need to go quickly here, and a market offer is more efficient than dealing with a political mess in parliament,” one of the people said.

The parliamentary option would entail passing a law in effect authorising a form of expropriation so that the state could take full control, another person said, even if it still involved financial compensation for shareholders.

Lazard and BNP Paribas are advising EDF, two people added.

No final decision on how to proceed has yet been taken and the timing of any offer is still uncertain, although it would most likely be after the August lull. French finance minister Bruno Le Maire said on Thursday the renationalisation could take several months.

The banks and France’s finance and energy ministries all declined to comment.

An offer to minority shareholders, which includes many of EDF’s own employees and other retail investors, would likely require support from all of the big French banks during the operation, another person familiar with the matter said.

To squeeze out minority investors, any offer would have to reach the 90 per cent acceptance threshold. The state controls 84 per cent of EDF today, while the minority shareholdings are currently worth roughly €5bn.

A swift resolution would remove EDF from the scrutiny of the stock market as it struggles with financial woes, even if a full nationalisation may do little to fix longer term problems the group is facing. Those include improving its industrial knowhow to avoid the huge cost overruns and missed deadlines that have plagued recent reactor projects.

Corrosion problems at some existing reactors have sliced EDF’s electricity output, and the group has warned its core profit will be hit by €18.5bn as a result this year. It has also had to foot the bill for some electricity price caps dictated by the government.

“In the short term, you have a situation in which the financial results are going to be catastrophic,” said Nicolas Goldberg, a senior energy analyst at Columbus Consulting. “There was going to be a need for another recapitalisation and the status quo was no longer possible.”

The Financial Times

Calls for extra £2bn on oil windfall tax

The Labour Party is seeking to backdate further the windfall tax on oil and gas company profits, which could cost the industry an extra £2 billion, writes Jon Yeomans.

The opposition has tabled an amendment to the Energy (Oil and Gas) Profits Levy Bill that would mean energy producers have to pay extra tax on profits made from January 9, when Rachel Reeves, the shadow chancellor, first proposed a windfall tax. The bill implements the tax from May 26, when Rishi Sunak, chancellor at the time, announced it.

The levy will raise the corporation tax rate on oil and gas groups from 40 per cent to 65 per cent until 2025. The Treasury has said it will raise about £5 billion to fund cost-of-living measures, but Labour says backdating it would capture more of the profits made from high oil prices. “The government’s delay means the public finances are missing out on funds that could have helped cut people’s energy costs,” said James Murray, shadow financial secretary to the Treasury.

The bill is to pass through the Commons tomorrow (Monday) as ministers seek royal assent before recess in two weeks’ time.

Mike Tholen, sustainability director at industry body Offshore Energies UK, said the tax was “highly punitive”. “This blanket tax rate of 65 per cent is already causing investors major concerns in the North Sea,” he said. “If Labour wants to do more, it’s going to damage the industry’s ability to provide employment and help keep the lights on this winter.”

The Sunday Times

Fears environment bills could be sidelined amid Tory leadership race

Crucial environment legislation must not be allowed to be sidelined or abandoned amid the distraction of a Tory leadership race, campaigners have warned.

Ministers openly admit they do not know what is going on with much of the legislation, but those who remain in government are working with skeleton teams to get bills in shape to be passed.

Two ministers at the Department for Environment, Food and Rural Affairs (Defra) have quit so far, Rebecca Pow and Jo Churchill, both of whom were working on environment legislation making its way through parliament.

Churchill resigned on Wednesday but on Thursday she was supposed to be in committees about a gene editing bill that would liberalise rules around genetic modification for crops and potentially livestock. The Guardian has been told this has now been passed to the minister Victoria Prentis, who has not resigned.

Prentis says she believes it is her duty to stay in government and get bills passed, rather than quit. Sources close to her say those remaining in Defra are “working flat out” because “the environment cannot wait until October”, which is when Boris Johnson’s allies have suggested he should remain prime minister until.

Bills experts are particularly worried about include the environmental land management scheme, which has faced criticism from the Tory right as well as from Labour and the Liberal Democrats. This legislation would reward farmers for conserving nature, and Defra sources say net zero will not be reached without this new subsidy system.

Other, newer bills under threat include the highly protected marine areas consultation, which would ban all fishing in some fragile ecosystems in England’s seas. This work was under Pow’s purview and is only in the consultation phase. It is unpopular with many in the fishing industry and could be junked.

Other departments are also in turmoil. After Michael Gove was sacked as levelling up secretary he was replaced by Greg Clark. Clark is now being given the task of deciding on the proposed Whitehaven coalmine in Cumbria but has not worked in the department for years. On Thursday the government also announced it was postponing for a second time a decision on whether to approve the £20bn Sizewell C nuclear power plant in Suffolk.

There could also be a wait of some time for a government response to the fracking review. The British Geological Survey has given its report on the safety and feasibility of fracking to the Department for Business, Energy and Industrial Strategy (BEIS), but the results will not be seen until the government responds to it, with BEIS sources saying they do not know when that will be.

BEIS will also have to deal with the cost of living and energy crises, with insulation measures and direct support for the poorest households the most urgent priority. The energy security bill is also coming, with an opportunity to overhaul the energy market so the low cost of renewable electricity feeds through to consumers.

The Cop president, Alok Sharma, has not quit but is drawing on the talents of a much-diminished cabinet and a government in chaos. The UK still holds the presidency until Cop27 in November and the government has yet to decide on the formal emission-cutting pledges to be made.

The Guardian

How to keep the lights on – UK gears up for worst-case energy scenarios

He is the man charged with keeping the lights on this winter. A seasoned civil servant, Jonathan Mills was last month named director general for energy supply in the Department for Business, Energy and Industrial Strategy.

In a blog entitled: “What do policymakers do all day?” – a nod to the children’s author Richard Scarry – he set out his approach to working in government earlier this year. “The way that I now think of a policy professional is as an ‘orchestrator’,” he said. Mills, who previously oversaw labour market policy, and before that electricity market reform, now faces the orchestration job of his life.

His appointment reflects the growing concerns over Britain’s energy supplies in the wake of Russia’s invasion of Ukraine. On Monday, Russia is closing Nord Stream 1, its main gas pipeline into Germany. The shutdown has been presented as a planned 10-day maintenance period, but there are fears the pipeline will not reopen, plunging Europe’s largest manufacturing nation into an energy crisis. Although Britain is not reliant on Russian gas, if supply drops, prices will rise even further.

National Grid has pledged to set out its winter plans this month, with the annual exercise brought forward from the autumn in 2020 due to Covid.

Britain’s existing emergency power supply plans are largely designed for outages caused by huge storms or faults in the system rather than supply shortages. But officials are having to confront the possibility of shortages stretching over months. In one “reasonable worst-case scenario”, millions of households could be forced to cut consumption at peak times.

The business secretary, Kwasi Kwarteng, beamed as he sat alongside the tartan-tied Centrica boss, Chris O’Shea, for a photograph last month. The British Gas owner had just signed a deal with Norway’s Equinor for enough gas for 4.5m homes over the next three winters. But O’Shea and Kwarteng now have a different deal to thrash out, over the Rough gas storage site in the North Sea. Centrica shut it down in 2017, but has now submitted an application to reopen it.

One source said any deal would be dependent on price guarantees for Centrica. The government will be keen not to overburden taxpayers with the cost of unpopular fossil fuels. Storage sites typically make money by buying gas on the cheap in summer and selling it at higher prices in winter. However, the unusually high prices this summer have undermined that model.

Kwarteng has also been forced to turn to coal. Britain has committed to phasing out the fuel by 2024 but the government has signed deals with EDF and Drax to extend the life of coal units through this winter, with the firms paid a fee and costs levied on consumer bills. Ministers hope to secure a similar deal with Germany’s Uniper to extend the life of its coal operations in Nottinghamshire within weeks.

Boosting nuclear supplies is not as straightforward. In May, France’s EDF said that time had run out for it to ensure it was safe to extend the life of Hinkley Point B in Somerset. One unit was shut down this week and another is due to shut on 1 August. They provided enough power to supply 1.5m homes. Its sister station, Hinkley Point C, is not expected to come online until 2027 due to construction delays.

As for renewable energy, blustery or bright conditions this winter could boost the contribution from the small but increasingly important power source.

The business department held talks last week with manufacturers that use large amounts of energy. Discussions are thought to have assessed current energy usage, changing shift patterns and potential three-hour shutdowns. “The starting point is always to insulate consumers from any disruption,” said one source involved in scenario-planning.

Certain manufacturers are already exempt if shutdowns for three-hour periods cause “significant financial damage”. It is understood steel plants, where coal-fired blastfurnaces run constantly, may be exempt from any future shutdowns.

If all measures to protect consumers from outages have been exhausted, officials may use “brownouts”, in which the electrical voltage is turned down. For households, that means lights may flicker more frequently.

In the direst circumstances, the government can turn to “rota disconnection”. This measure splits the country into power regions which could experience blackouts for three hours at a time with increasing levels of frequency depending on the severity of the shortages. The printed rota looks like a chessboard at first, with a black square for each region on each day and no area shut off simultaneously. By its worst point – “level 18 disconnection”, its doomsday scenario of a national, week-long outage – shows simply an entirely black timetable.

A “protected sites list”, under laws enacted during the 1970s miners strikes, details buildings which are of “national or regional critical need”, protected from closure because of “potential for catastrophic damage to high value plant”. It includes airports, hospitals and water treatment plants. Power stations can use “black starts” – where diesel generators slowly restart the plant – if they are hit by outages.

If a rapid power boost is needed, the fastest source of electricity in the UK is Dinorwig, a picturesque pumped hydroelectric power plant in north Wales. Nicknamed “Electric Mountain”, the secluded lake has six pump-turbine units housed in its main cavern, which can be ramped up from standby to a capacity of 1.32 gigawatts in 12 seconds.

A key question for Mills will be whether to ask households to change their habits. The International Energy Agency said in March that Europeans should turn down their thermostats by 1C to save on gas and reduce dependency on Russian imports.

Under one scheme, trialled by Octopus Energy and endorsed by National Grid, consumers could even be paid to use less energy during peak times. Households could be paid up to £6 a kilowatt hour in credit instead of paying out 28.34p a kilowatt hour. Other options remain on the table, such as encouraging people to wrap up, insulate their homes or even rationing hot water, as the city of Hamburg is considering. With a rummage in his toolbag, Mills has some help to call on, but few easy choices.

The Observer

Thames Water’s legal costs soar to more than £50m in 2022

Thames Water’s legal costs soared to more than £50million in 2022 amid a public outcry over sewage pollution.

Britain’s largest water firm set aside £53million in environmental-related provisions last year – more than double the £22.9million a year before, company filings show. UK water firms have faced public fury over the dumping of raw sewage into Britain’s waterways.

Water companies in England discharged waste into rivers on more than 400,000 occasions in 2020, according to the Environment Agency last year.

Thames Water is being investigated by regulator Ofwat and the Environment Agency over pollution failures and sewer overflow.

The company said in its latest report: ‘We’ve faced considerable scrutiny over our ability to demonstrate compliance with… regulations regarding wastewater treatment works.’

Thames Water chief executive Sarah Bentley was paid £2million in 2022, including an annual bonus of £496,000.

Daily Mail

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