Weekend press round-up: Energy bill support for firms to be cut

In our latest review of sector coverage in the national media, there are multiple reports that the government will announce reduced support for business energy bills today, as trade bodies warn of the strain their members are under. Meanwhile, an influential Conservative committee has called for communities living near new onshore wind and solar farms to be given 100% discounts on their energy bills and there are warnings that England faces further droughts this summer.

Energy bill support for firms set to be cut

A new scheme to support firms with their energy bills will be announced in the House of Commons on Monday.

The current scheme which caps the unit cost of gas and electricity for all businesses expires at the end of March.

It will be replaced with a new scheme that offers a discount on wholesale prices rather than a fixed price.

Very heavy energy-using sectors, such as steel, glass and ceramics, are expected to get a larger discount than others, Treasury sources said.

The energy support scheme is mainly used by businesses, but is also for charities, and public sector organisations such as schools and hospitals.

Firms have been warning of a “cliff-edge” when the current support stops at the end of March, and the new scheme is expected to run until March 2024 to avoid this.

But the total level of government support is expected to fall sharply – by more than half – from the £18.4bn the current six-month scheme is estimated to have cost by the time it ends.

BBC News

Energy companies face a crackdown after pub bills ‘rip off’

Energy companies could face an Ofgem crackdown after whacking rip-off surcharges on hard-up boozers, bars and bistros.

The watchdog and ministers have slapped down the firms after complaints from hospitality businesses who’ve been crippled by excessive demands for payment upfront, inflated admin fees or restricted access to the best deals.

Suppliers could face fines while junior ministers held a meeting with energy companies to hold them to account and set “clear expectations” of their behaviour.

In a letter sent by Ofgem late last year the watchdog warned: “suppliers should not profit from the current state of the market in a way that negatively impacts customers and must not subvert the intent of the Energy Bill Relief Scheme.”

It added: “We are reviewing our options to introduce additional regulations to protect all non-domestic consumers.”

Mark Selby, boss of Mexican restaurant chain Wahaca said his supplier demanded £740,000 up front for energy last year.

He said: “I would have liked to have seen some form of restriction on the energy companies as to the extent they could apply a premium because it just feels completely unnecessary when the government has made such a big sacrifice.

“It’s just to top up their profits.”

Industry body UKHospitality said their members were reporting inflated prices for “no justifiable reason.”

Kate Nicholls, the body’s Chief Exec said: “Their actions hiking prices, demanding excessive deposits and singling out hospitality as ‘high risk’ is undermining the Government’s intention to support businesses, and leaving hospitality as collateral damage in the greedy pursuit of excess profits.”

The Sun

UK manufacturers issue warning over cuts to energy support

Manufacturers have warned that high energy costs will force them to cut jobs and production this year, with some bosses saying political chaos is damaging UK competitiveness and making the country less attractive to foreign investors.

The warning from trade body Make UK comes as ministers finalise details of a revised scheme to be unveiled as early as this week, that will replace existing energy cost support for businesses that ends in April.

It is expected to offer businesses significantly less financial support at a time when many are struggling with higher costs.

The successor scheme represents a U-turn by chancellor Jeremy Hunt, who said in the autumn that state help with energy bills would end in the spring for the vast majority of companies.

Even so, the estimated cost of £5bn over a year is barely a seventh — on a per-month basis — of the £18bn the government has spent capping business energy bills during the current six-month scheme.

The government is also set to provide extra help for energy-intensive companies but this is likely to be limited to a handful of sectors.

Make UK said that a less generous energy relief scheme was likely to exacerbate planned reductions in headcount and production.

In a survey of top executives in the manufacturing industry conducted with PwC, Make UK said that almost three-quarters of companies expected their energy costs would increase this year.

Two-thirds of these said that they expected to take actions such as reducing production or headcount, with similar numbers saying that energy costs were both the biggest risk to their company as well as to business confidence.

Almost half of companies supported extending the support scheme in its current form.

The Financial Times

Gas price dip signals £13bn ‘windfall’

Tumbling gas prices thanks to unseasonably warm weather could save the government billions of pounds in energy subsidies and debt interest payments, raising questions about how the chancellor might spend the money instead.

Analysts have calculated that the Treasury could save the estimated £13 billion it planned to borrow to pay for a household energy cap this year, giving Jeremy Hunt sizable headroom before his spring statement.

The UK’s wholesale gas prices dipped below pre-Ukraine war levels this month, to as low as £1.62 per therm last week. That compares with a peak of £6.40 at the height of the energy crisis in August and is a drop of more than 50 per cent since the start of December.

Prices have fallen because unusually warm temperatures in the UK and Europe have reduced demand for energy and because demand in China has been depressed by a rising number of coronavirus cases.

Falling gas prices will reduce the cost of the government’s energy price guarantee, which has capped the typical household energy bill at £2,500 since October. The Treasury borrows to pay the difference between the cap and market prices. The cap was due to be raised to £3,000 from April, at a cost of £12.8 billion in 2023-24, according to the Office for Budget Responsibility.

In a new analysis the Centre for Economic and Business Research (CEBR) has calculated that a fall in market gas prices that mirrors the recent decline would wipe out the need for £12.8 billion in extra borrowing.

“The additional fiscal headroom could be used to address the crises that the UK currently faces, including an imploding health system,” said Kay Neufeld, head of forecasting at the CEBR. “A prudent approach would be to retain at least some of the windfall, which would help to further restore confidence in the UK’s fiscal policies.”

The CEBR calculations are based on modelling that would lead prices to hit £1.54 per therm in January next year.

The government will get an extra fiscal boost from lower interest rate payments on inflation-linked debt as falling gas prices will help to bring down inflation. The CEBR said that if current market prices were maintained, consumer price inflation could fall three percentage points more than current Bank of England forecasts this year.

The Times

EDF Energy backs Ofgem reforms as Centrica makes fresh ringfencing push in bid to ‘protect’ consumer balances

EDF Energy has backed Ofgem’s plans to toughen financial requirements for suppliers – which stop short of the full ringfencing of customer credit balances supported by rival and British Gas owner, Centrica.

Currently, firms are not required to ringfence credit balance – instead allowing them to invest them.

This could lead to customers not being able to recoup credit balances – effectively, energy paid for up front – if a supplier goes bust.

EDF praised the watchdog’s decision to bring in capital adequacy demands, announced last November, as the regulator scrambles to clean up the energy market.

An EDF spokesperson told City A.M.: “EDF remains supportive of Ofgem taking measures to improve the financial resilience of the retail market, which will lead to more sustainable competition in the long-term, to the benefit of consumers.”

It has also not backed Centrica’s calls for energy firms to tell customers whether credit balances are fully protected if they go bust.

By contrast, the French energy firm seemingly prefers a more targeted approach, encouraging Ofgem to step in if and when it had issues with a supplier’s financial strategy.

This includes their use of funds allocated for buying customers’ energy.

EDF’s comments come after Centrica made contact with consumer rights charity Citizens Advice, asking for its support to bring in disclosure requirements across the industry – according to The Guardian.

City AM

Tories want free energy for people living near wind farms

Communities living near new onshore wind turbines and solar farms should be given 100 per cent discounts on their energy bills, Tory MPs have said.

The 1922 backbench committee on business, energy and industrial strategy has recommended a tiered system to provide an incentive and compensate people for renewable energy facilities.

It says all new onshore wind farms and solar farms should be subject to a local referendum. Those living within a mile of a proposed scheme should be given free energy, it argues. Those within three miles should get a 50 per cent discount and those within four miles 25 per cent over the lifetime of the project.

Rishi Sunak was forced to drop the Conservative Party’s moratorium on new onshore wind turbines after a revolt by Tory MPs, including the former prime ministers Boris Johnson and Liz Truss. Construction of turbines in England has in effect been banned since 2015 under planning restrictions introduced under David Cameron, who said people were “fed up” with them.

More than 50 Tory MPs, including Johnson and Truss, have been pushing for an end to the ban as part of efforts to boost growth and make Britain more independent in energy.

The government will consult on allowing turbines to be built if they have local support and as long as concerns about their impact have been “satisfactorily addressed”.

The 1922 committee on business and energy has set out plans for a compensation scheme because onshore wind turbines “typically cause more disruption and adversely affect more people” than offshore wind turbines.

The committee, led by Dame Andrea Leadsom, the former business secretary, also recommends “local pricing” that would give people lower bills based on the presence of renewable energy.

Other recommendations include stopping payments for wind farms that turn off when it is too windy because there is too much energy supply. The committee says this approach would give energy companies an incentive to invest in more storage.

It also suggests that all white goods, such as dishwashers and washing machines, should be “smart as standard”, enabling their use to be focused on periods when energy is cheapest.

The Times

Government under pressure to halt forced prepayment meters as MPs calls for urgent ban

The Government is facing growing pressure to halt the forced installation of prepayment energy meters as a cross-party group of MPs calls for an urgent moratorium on the controversial devices.

The All-Party Parliamentary Group for Fuel Poverty and Energy Efficiency says it is concerned for the safety of vulnerable utility customers this winter and ministers must take swift action.

An investigation by i found that magistrates are granting hundreds of warrants in a matter of minutes, allowing debt collectors acting on behalf of major energy firms to force entry into customers’ homes to install the meters.

The Ministry of Justice has since admitted it has no central record of why access to homes has been sought by the firms, with the investigation identifying that nearly 500,000 entry warrants have been granted by courts since the last Covid lockdown. Magistrates insist they have “no choice” but to approve them.

i told this week how one million out of the 4.8 million households on prepayment meters are on disability benefits – raising further concerns over a lack of judicial oversight of the vulnerability of customers. Disability equality charity Scope said the forced installations are “immoral”.

The all-party group of MPs, including Labour’s Shadow Energy Minister Dr Alan Whitehead, the Greens’ Caroline Lucas, Liberal Democrat Lord Stunell and Conservative backbencher Peter Aldous, said: “Reports about the batch approval of warrants from magistrates’ courts risks vulnerable customers, including those with medical conditions, being forced onto prepayment meters against their will and when this could be unsafe.

“In the first instance, the Government must act urgently to issue a moratorium on new prepayment meter installations over the winter. Alongside this, Ofgem should ensure households with medical conditions are transferred away from prepayment meters as a matter of urgency.

“We know that households with these meters are more likely to be in fuel poverty and have often experienced high debt levels. The Government should provide financial support to consumers specifically to clear debts and bring forward additional targeted assistance for prepayment meter customers in the next Budget.”

iNews

Water security in focus as England faces threat of another summer drought

England faces another drought this summer unless the country receives above average rainfall in coming months, according to the latest assessment by the country’s environmental watchdog.

A preliminary analysis by the Environment Agency of the impact of the recent wet weather on water levels found that most of England was “still in drought” in mid-December, with some reservoir levels well below normal levels.

The findings came despite the agency having dozens of flood warnings and alerts in place and raises the prospect of a repeat of the widespread hosepipe bans that were put in place last August during the driest summer for 50 years.

The heatwave in 2022 put the spotlight on issues of water security and leakage as scientists warned climate change would lead to hotter and drier summers in future. The focus reignited the debate about the effectiveness of England’s privatised water system, in which a fifth of the water supplied is lost every year.

Fixing the many leaks is a large part of drought-proofing the country but not the only solution. “Over winter we expect water companies to fix and reduce leaks, identify new sources of water and work with farmers, growers and other sectors to protect our precious water resources should drought remain next year,” said John Leyland, Environment Agency executive director, when he warned in November of possible water shortages in 2023.

At the core of the problem is the ageing water infrastructure, some of which is 150 years old. Leaks are commonplace across the 350,000km network of pipes that criss-cross the country but are often small and invisible from ground level making them hard to pinpoint.

“The network is so vast that even if you were to add a significant investment you couldn’t say ‘we could redo every pipe that’s older than 20 years,’” said Nicole Metje, professor of infrastructure monitoring at the University of Birmingham. “It takes time and people to fix [leaks].”

Leakage has declined by roughly a third since 1992, shortly after privatisation in 1989, but the rate of progress slowed from about 2011. French leakage rates are similar to the UK’s, but Germany and Japan — which have replaced more of their old pipes — perform better, according to trade body Water UK.

Many British water companies lack complete maps of their pipe networks, and efforts to fix leaks are often reactive, prompted by someone reporting a problem. Metje said the replacement programme would benefit from greater use of so-called “smart pipes” that monitor water flow in real time. “I think we’re missing a trick” by not installing smart systems during routine upgrades, she added.

The government has set the industry a target to halve leakage rates by 2050, while Ofwat has set a five-year target of a 16 per cent reduction by 2025.

But critics said the industry regulator’s targets were too soft and the level of fines it can levy for missing them are too small. They have urged the watchdog to clamp down on water companies when it sets how much they can charge customers in the next five-year regulatory period from 2025.

The Financial Times

Shell to pay UK tax for first time in five years

Shell has said it will pay tax in the UK for the first time since 2017 after making huge global profits last year.

The energy firm said it expected to “take a hit” of around $2bn (£1.7bn) on profits in the UK and the European Union in final three months the year.

Governments have imposed taxes on energy companies to capture some of the massive profits firms have made through high oil and gas prices.

Shell will not disclose at present how much UK tax it will finally pay.

It is understood the figure could be lower than forecast at this stage.

The amount of tax oil and gas companies pay in the UK can be reduced after factoring in losses, investment in areas such as renewable energy or decommissioning North Sea oil platforms.

Last year, Shell revealed a huge jump in profit, which reached $9.5bn across its global business between July and September.

At the time, Shell said that because it had made large investments in the UK it had not made a profit in the country and was therefore not required to pay taxes.

But on Friday, the company confirmed that it does expect to pay some tax in the UK for the first time since 2017.

BBC News

BP’s plan to cash in on the solar power boom

BP plans to build its first solar farm with battery storage on a site in Tiln Farm, Retford, as it prepares to make the technology the norm globally.

Nick Boyle, the head of energy giant BP’s solar joint venture, says he believes battery storage technology will be widely included as part of solar farms, helping to tackle the problem of intermittent energy.

“If solar accounts for maybe only two to 4pc of the electricity generation, there’s not a lot of need for it, because the grid will cope. But as you get to 10 to 20pc and beyond, which are the projections we’re looking at, then you need to be able to control it,” says Boyle.

The company wants to develop four gigawatts of battery capacity at projects around the world by 2025.

As well as helping to solve intermittency problems, battery storage could develop new revenue streams for Lightsource BP, given the high value put on electricity which can be supplied exactly when needed.

“It allows you income streams that you haven’t necessarily had access to before,” says Boyle, adding that the UK is “way ahead of many other markets” in encouraging battery development. “In many countries where we would love to put batteries in, there is no income from that.”

The Daily Telegraph

Net zero possible in 2040s, says outgoing UK climate business expert

The world could reach net zero greenhouse gas emissions in the early 2040s, substantially ahead of the mid-century climate target, if governments set more stretching goals and make bold policy decisions, the UK’s outgoing climate business expert has said.

Nigel Topping served for two years as the high-level champion for the UK’s presidency of the UN Cop26 climate summit, passing on the role to Egypt’s Mahmoud Mohieldin late last year at the Cop27 summit in Sharm el-Sheikh.

In his role, he forged alliances among businesses to lead a “race to zero”, by which companies set targets to reach net zero emissions and laid out the measures they would take to achieve them. More than 8,300 businesses around the world are now members of the UN’s Race to Zero initiative, alongside more than 3,000 other organisations including cities and local governments.

Topping said his experiences with businesses had shown him that governments could move much faster, without harming their countries’ competitiveness or alarming the business community.

“Governments could be way bolder in setting targets, and back their scientists, engineers, businesses, banks, cities to come up with solutions,” he said. “The moonshot analogy is not inappropriate.”

In the UK, the Climate Change Committee produced a plausible scenario by which the UK could reach net zero by 2042, he said. “Given that we’ve now got California and Germany saying 2045 is their target, I think you can argue quite strongly that the whole world could get to net zero in the early 2040s, and in many sectors in the late 2030s,” he said.

The experience of the Covid-19 pandemic had shown what governments could do when they tried, he added. “The lesson [from the pandemic] that I still don’t think we’ve learnt enough is that we can do unbelievable things, governments can turn on a dime if they need do, and the government/private sector relationship can be transformed to deliver solutions way, way faster, if we really put ourselves on an emergency footing.” .

He said the need for such an urgent transformation was growing more apparent in the form of extreme weather around the world.

The Guardian

A soak in the tub could cost £1,000 every year, water company warns

Running the bath is likely to cost households over £1,000 this year, new research has forecast, more than double the price in 2022.

That follows another mammoth increase last year when the cost surged by 79 per cent.

Altogether, between 2021 and 2023, the annual cost is expected to have vaulted from £303 a year to £1,023.

The research, put together by Yorkshire Water, found that numerous everyday actions involving water were spiralling in cost despite the fact that water rates remained unchanged.

Boiling the kettle for a cup of tea was found to be 80 per cent more expensive last year, equivalent to an extra £8.32 a year, and was expected to go up by a further £3.36 this year.

Running a dishwasher, meanwhile, nearly doubled in price last year to £236, as did the cost of using a washing machine, which reached £223.

By far the most expensive use of water, however, proved to be the humble bathtub. Water companies and environmentalists have long recommended switching from baths to shorter showers to conserve water, but the added impact of energy price spikes has created a renewed incentive.

Emily Brady, of Yorkshire Water, said: “Managing water use in the home is a great way to keep bills down.

“The environmental benefits to saving water are well known, but there are also great cost savings to reducing your usage – especially when it comes to heating water.”

The figures from Yorkshire were based on three baths a week per household. The company recommended switching to five showers a week instead. It also recommended that shower users cut their ablutions from eight to four minutes.

Added up, the average household could save £700 a year, the utility company said.

The Daily Telegraph

Great Britain’s windfarm electricity at record high in 2022 but gas use up too

Windfarms produced a record amount of Great Britain’s electricity last year, although gas-fired generation also increased, National Grid has said.

Figures from the company’s electricity system operator (ESO) showed that wind-powered electricity accounted for 26.8% of generation in 2022, up from 21.9% the year before.

In late January last year, wind-powered electricity gained its highest ever share of the energy mix, accounting for 64% of generation.

Earlier this week, the ESO said that a new record for wind generation was set on 30 December, when 20.91 gigawatts (GW) were produced by turbines.

Renewable energy and nuclear power sources combined to generate 48.5% of Great Britain’s electricity, compared with 40% from gas and coal fossil fuels. The ESO said it was the second greenest year on record, behind only 2020.

However, gas-fired power stations, at 38.5%, reached a three-year high as the single largest source of generation during a year in which wholesale gas prices soared as Russia’s invasion of Ukraine upended international commodity markets.

The Guardian

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.