Weekend press round-up: Energy suppliers may increase bills by £30 to repay rising debt

In our latest round-up of the weekend’s national press, Ofgem is considering letting suppliers charge households an average of £30 annually to recoup a forecast rise in debt following curbs on prepayment meter installations. Elsewhere there are concerns about a lack of funding for the Sizewell C nuclear power station, while anger is expressed over bonuses paid out to Wessex Water bosses.

Energy suppliers may increase bills by £30 to repay rising debt

The energy regulator is considering letting suppliers charge households an average of £30 a year to recoup a forecast rise in unpaid bills following curbs on prepayment meter installations.

Ofgem could introduce the charge on energy bills by October to reimburse companies for rising levels of customer debt that it estimates could total hundreds of millions of pounds. It is considering letting suppliers levy a much higher share of the costs on about four million UK households that pay by cash or cheque, who are the most likely to fall into debt and already pay a £200-a-year premium for their energy as a result.

Campaigners urged Ofgem to tackle the causes of debt and find a fairer way of reimbursing suppliers for any increase in unpaid bills instead of making the problem worse for those already struggling to pay.

Energy companies often seek to prevent people building up big debts by installing prepayment meters (PPMs) that prevent them using gas and electricity unless they have paid for it. Installation rates soared as customers struggled with record bills last year. An investigation by The Times this year found that prepayment meters were being forcibly installed in the homes of vulnerable customers.

In response, suppliers halted installations under warrant and Ofgem has introduced extra curbs through a code of practice. Companies complain, however, that this will lead to an increase in unpaid bills or bad debt that could threaten their finances unless they can recoup the costs from customers.

Ofgem’s energy price cap determines the maximum tariffs that suppliers can charge based on the costs it estimates they incur, including allowances for bad debt. It said it was preparing to “consult on whether an adjustment to the debt-related costs allowance in the price cap may be required”.

An Ofgem spokeswoman said: “We recognise that the rules set out in our code of practice could result in fewer PPM installations and that, combined with the current suspension in involuntary PPM installations, this may contribute to higher levels of bad debt of around £30 a year for a household.” The price cap already allows suppliers to charge customers about £200 a year more if they pay by “standard credit” — by cash or cheque on receipt of the bill — than if they pay by direct debit.

The premium primarily comprises a higher bad debt allowance: suppliers can charge standard credit customers about £200 a year to cover debt-related costs compared with only about £30 for direct debit customers. Ofgem says this reflects the fact that standard credit customers are more likely to have unpaid bills and so, on average, create higher debt costs.

The Times

Pension funds shun Sizewell C in major blow to Britain’s nuclear ambitions

The Government’s push to find investors for the £20bn Sizewell C nuclear power station has suffered a significant blow as Britain’s biggest fund managers have snubbed the scheme.

Jeremy Hunt, the Chancellor, sought to make the project more attractive to green-focused asset managers in his Spring Budget by proposing to give it “sustainable” status under UK financing rules.

Ministers have also reformed the funding model for nuclear plants to hand investors more up-front rewards.

But senior sources in the asset management industry and two of the country’s biggest fund managers have dismissed the changes as irrelevant and insisted it would not persuade them to back Sizewell C.

Nuclear power is seen as vital to Britain’s energy security in the wake of the Ukraine war, with ministers calling for it to generate 25pc of the country’s electricity needs by 2050.

But despite introducing new funding models and classifying it as “green” to attract investors, the Government has struggled to persuade sceptical pension funds and asset managers to get behind Sizewell C.

Legal & General – Britain’s biggest money manager with £1.3 trillion of assets – said Mr Hunt’s announcement will have no bearing on its opposition to large nuclear energy schemes, as it is focused on supporting alternatives such as wind and solar.

A spokesman for Legal & General Capital told The Telegraph: “Our stance hasn’t changed: we are focused on investing in and supporting other innovative, viable, and cost-effective clean energy solutions that are already delivering results.”

Aviva, another major fund manager and Britain’s biggest provider of life insurance, also appeared to snub Mr Hunt’s announcement.

A spokesman said the company had “nothing to add” to a statement last year by chairman George Culmer, who said there was “ongoing debate” over the issue due to environmental concerns around nuclear waste.

Previously, the BT Pension Scheme and NatWest have told campaign group Stop Sizewell C that they will also not back the project.

A senior industry source told the Telegraph that the Government would struggle to find backers for Sizewell C because many asset managers remained “extremely sceptical”.

“Big infrastructure projects of this kind are enormously risky and require a lot of cash up front,” the source added. “They also have a track record for going massively over-budget and over-schedule.

“And whether the Chancellor calls it green or not, people know what they think about nuclear – it is very hard to describe something as sustainable when it involves burying toxic waste in the ground.

“There are other, cheaper ways to generate electricity.”

Mr Hunt has said nuclear power is needed to provide a reliable source of electricity in future, alongside renewables, “because the wind doesn’t always blow and the sun doesn’t always shine”.

But only one nuclear power plant, Hinkley Point C in Somerset, is currently under construction and will not open until 2027 at the earliest, with all but one of Britain’s existing power stations due to have shut by then.

A second scheme, Sizewell C in Suffolk, is also being progressed by Hinkley developer EDF and the Government at an estimated cost of £20bn to £30bn, but the exact split of private and public funding being sought has not been confirmed.

Bosses at Sizewell C have previously claimed the plant will generate “vast amounts of very low-carbon energy” with a small footprint compared to other sources of sustainable energy, while creating thousands of jobs and bringing significant investment into Suffolk.

So far the Government has invested around £800m in the project and shares ownership equally with EDF, but it is hoping to bring in new backers after forcing China General Nuclear out over security concerns.

Ministers hope further financing can be attracted through the newly-introduced regulated asset base (RAB) model.

Funded by a levy on household energy bills, the RAB model would guarantee investors a fixed income from the project during construction, reducing their exposure to risk. The Government has claimed it would only add £1 per month to household bills.

The Government has vowed to take a final investment decision before the end of this parliament.

Barclays has been brought in to run the financing process but this has not yet begun, prompting concerns it could be held up by a potential general election next year.

A Department for Energy Security and Net Zero spokesman said: “New nuclear is key to our long-term energy security – that’s why the Government made a historic £700m investment to help develop Sizewell C and become a project shareholder.

“We are working closely with the project company to attract new finance.

“We know many investors are prepared to support infrastructure delivering energy security and net zero, including new nuclear power, and we are confident that investors will take assurance from the Government’s clear commitment to the nuclear sector.”

The Telegraph

UK, Netherlands plan cross-border power link to boost energy security

The Netherlands and Britain plan to build what would be Europe’s biggest cross-border electricity link connected to an offshore wind farm, their energy ministers said on Monday, part of efforts to boost energy security.

The “LionLink” interconnector will be able to transfer 1.8 gigawatts (GW) of power to Britain from a Dutch wind farm, or the same volume of electricity produced in Britain to the Netherlands, they said in a statement ahead of a leaders summit on energy in Ostend, Belgium.

The link, being developed by Britain’s National Grid and Dutch electricity network operator TenneT, will move enough surplus power between the countries to power the Dutch province of Zuid-Holland, or the British cities of Birmingham and Manchester combined, the ministers said, without specifying the route of the cable.

“This new connection further boosts energy security and energy independence in Europe,” Dutch Energy Minister Rob Jetten said in a statement.

Britain’s energy minister Grant Schapps said the countries were “sending a strong signal to Putin’s Russia that the days of his dominance over global power markets are well and truly over.”

Britain and the Netherlands currently have one power interconnector, the 1GW BritNed link.

The new project is part of a broader pledge the governments of nine countries around the North Sea will make on Monday, to develop renewable energy in the region as they strive to avoid a repeat of their over-dependence on a single foreign source like Russia.

Reuters

Ofgem to call for vulnerable households register, with 1.7m to miss energy support

The energy regulator Ofgem will on Monday call for vulnerable households to be better protected through a new universal priority services register, as researchers warn that about 1.7m households in severe fuel poverty will miss out on extra help because they are not registered to receive certain benefits.

A report commissioned by the Child Poverty Action Group found that the UK government’s new plans to offer targeted help for the most vulnerable households would fail to reach those who were not registered for benefits, including 688,000 fuel-poor households with children.

The new support to help vulnerable households pay their energy bills includes a £900 payment for those on means-tested benefits, £300 for pensioners and an extra £150 for disabled people. However, many fuel-poor households – mostly based in London, the north-east and the north-west – will go without, according to researchers at the University of York.

The targeted payments replace a previous government support scheme that offered a £400 discount to help all households cover their winter energy bills. From 1 April the government has offered a cap on the unit cost of energy, to an average of £2,500 a year for a typical household, as well the one-off payments for households that receive certain benefits.

Prof Jonathan Bradshaw, from the University of York’s social policy research unit, said the study shows “the limits of using the receipt of social security benefits to mitigate fuel poverty”.

Simon Francis, the coordinator of the End Fuel Poverty Coalition, said that, if anything, the findings of the study “underestimate of the problem as the definition of fuel poverty used for these calculations is one of the most targeted available”.

He added: “Millions of people will be worse off in 2023-24 as energy bills remain high but support from the government has fallen in real terms.”

The study was published as the energy regulator for Great Britain, Ofgem, prepares to meet leaders from consumer groups and charities, the utilities sector, trade representatives and government to discuss plans for a universal priority services register of vulnerable households that could offer more targeted support in the future.

Jonathan Brearley, Ofgem’s chief executive, is expected to say: “We should all consider building towards a joint register, not just between water and energy, but including local and national government.

“Ideally, this register would be based around a ‘tell us once’ principle –where families who have vulnerabilities tell one agency about this and, with permission, this is shared across the others with a single, reliable source of data to anticipate, identify, and respond to the needs of those customers.”

A spokesperson for the Department for Energy Security and Net Zero said: “We know this is a difficult time for families, which is why the government covered around half of the typical household’s energy bill over winter.”

The spokesperson said the government’s energy price guarantee scheme would continue to help “the vast majority of households” at the same level of support until the end of June, and additional support would be extended to the most vulnerable.

The Guardian

GE-Hitachi takes on Rolls-Royce in race to build nuclear SMR plants

GE-Hitachi, the American nuclear power specialist, will take on Rolls-Royce in the race to build small modular reactors (SMRs) in the UK after entering a government-run competition.

Jay Wileman, GE-Hitachi’s chief executive, said it was “excited” to enter the contest to choose a design for SMRs announced by Jeremy Hunt, the chancellor, last month. “We think we’re in a very good position to be very competitive and be one of the chosen technologies.”

GE-Hitachi, a joint venture between General Electric and the Japanese conglomerate, is a frontrunner alongside Rolls.

SMRs can be pre-fabricated in a factory and assembled on site, slashing the cost of nuclear projects.

The government has formed Great British Nuclear to oversee policy. It will begin meeting SMR suppliers next month and aims to select winners by the autumn.

Wileman said GE-Hitachi’s BWRX-300 reactor would cost in the “low single-digit billions”. It is developing the first in Canada and is looking to sell it to other countries.

“Unlike Rolls, we are already doing our first one in North America,” said Wileman. “We’re going to get global economies of scale that we can leverage.”

Paul Stein, chair of the Rolls-Royce SMR consortium, said its design had passed the first stage of the regulatory process last month. “That’s provided a real sort of confidence in the team… that we’re on a winning path.”

The Times

Bonuses for Wessex Water bosses criticised over sewage

Wessex Water paid £200,000 to four bosses tasked with protecting and enhancing the environment despite foul water discharges into rivers.

Sewerage overflow is causing bacteria in our water which is potentially harmful for wildlife and swimmers.

Water campaigner Feargal Sharkey called the bonusses “unjustified”.

Wessex Water defended paying the bonuses for 2021-2022 and recent £63.5m dividends to shareholders as they say they have exceeded their targets.

The director of infrastructure development Matt Wheeldon said the bonuses do not drive him and he could not remember how much he received.

“Bonuses are based on performance, and performance is based on the targets we are set by third parties – by our economic regulator and our quality regulator,” he said.

“Bonuses are only paid if we hit those targets. The level of the bonus is decided by an independent remuneration committee.

“Dividends are regulated by our economic regulator. They set us targets if we outperform those targets there is a reward for that. We spent closer to £300m last year on all our investment,” Mr Wheeldon added.

Former Undertones frontman turned water campaigner Mr Sharkey said the bonuses were “uncalled for, unjustified and should not have been paid”.

“The simple reality is every single river in England is polluted and one of the largest sources of that pollution is the water industry,” he said.

In 2022, Wessex Water got red flags for missing targets over increasing the stretches of clean rivers and beaches.

BBC

Lake or mistake? The row over water firms, drought and Abingdon’s new super-reservoir

In the Observer, concerns are raised about proposals for a new 150 billion-litre reservoir to be built to the south-west of Abingdon in Oxfordshire. Campaigners raise concerns about the feasibility and safety of the £1.4 billion reservoir, which is being proposed as part of the long-running debate over water shortages in south east England.

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.