Weekend press round-up: Energy suppliers urged not to force customers onto PPMs

Energy suppliers have been urged by MPs to stop "forcing" customers onto prepayment meters amid calls to name and shame those companies that compel users to move to these tariffs at a time when householders struggle to heat and power their homes. Elsewhere, fears that electric vehicle production can not be affordable are voiced alongside the story of why Britishvolt collapsed without securing a major customer.

Stop forcing people on to prepayment meters, UK minister urges suppliers

The business secretary has urged energy suppliers to stop forcibly switching households struggling with energy bills to prepayment meters, after calls for government action amid claims that millions have been left without heat or light.

Grant Shapps has written to companies asking them to voluntarily end the practice of compelling households to move to more expensive prepaid energy tariffs and promising to “name and shame” the worst offenders.

Energy firms should instead make greater efforts to help those struggling to pay their bills, such as offering credit or debt advice, Shapps wrote, suggesting prepay installations should be a last resort. He also requested suppliers reveal the number of warrant applications made to forcibly enter properties to install meters.

Under existing rules, energy firms are not allowed to forcibly install prepayment meters or remotely switch a household’s smart meter to a prepay tariff without first exploring the financial help on offer or carrying out appropriate assessments, including identifying any vulnerability.

Older people or those with an illness or disability who are unable to use a prepayment meter are supposed to be protected under the regulator Ofgem’s licensing rules. Customers must also have been given time and help to pay.

Despite this, the courts have been inundated with requests from suppliers to switch customers. Data obtained from the Ministry of Justice through a freedom of information request revealed hundreds of warrants of entry are being signed off in huge batches in minutes in by magistrates.

Such warrants authorise staff to break into people’s homes and install a prepayment meter. Households with one pay a 2% price premium, while those on card meters face the extra cost and hassle of having to travel to buy them.

Ministers have been urged by fuel poverty charities and a cross-party coalition of MPs to halt the practice of forcible installations, with Labour calling for a three-month moratorium.

However, the government is resisting such a ban amid concerns over a subsequent increase in bailiff action as customers rack up bills they are unable to repay, leaving energy companies trying to recover bad debts.

Shapps said: “Suppliers are clearly jumping the gun and moving at-risk customers on to prepayment meters before offering them the support they are entitled to – I simply cannot believe that every possible alternative has been exhausted in all these cases.”

He added: “Rather than immediately reaching for a new way to extract money out of customers, I want suppliers to stop this practice and lend a more sympathetic ear, offering the kind of forbearance and support that a vulnerable customer struggling to pay should be able to expect.”

Hundreds of thousands of customers have been switched over to more costly prepayment meters in recent months, often unwillingly and without the offer of support, after failing to keep up with rising energy payments.

Last week, ScottishPower, which has nearly 5 million customers, said it had stopped recovering outstanding debts from people who have been moved on to prepayment meters. British Gas said it would no longer switch smart meter customers remotely to a prepay tariff this winter unless they ask for it.

The Guardian

UK government set for payback from Bulb sale to Octopus

The UK government is set to recoup hundreds of millions of pounds from the sale of the collapsed power supplier Bulb to Octopus Energy as long as wholesale gas prices do not rise again in the coming months.

The Whitehall financial watchdog had predicted that taxpayers could lose up to £6.5bn as a result of Bulb’s 2021 failure, which prompted the biggest state rescue of a business since the financial crisis. The potential payback from the Octopus deal will raise hopes that the cost to taxpayers and households of Bulb’s temporary nationalisation will come in well below expectations.

The recent drop in energy prices — if it continues — would shave up to £840mn from the eventual losses, officials have estimated. Bulb was quasi nationalised in November 2021. In December 2022, it was taken over by its larger rival Octopus in a controversial — and opaque — deal signed off by the Department for Business, Energy and Industrial Strategy following a long-running sales process that drew only one bidder.

Ministers have been criticised for refusing to give the precise terms. As part of the deal, the government agreed to lend Octopus the cost of buying energy for Bulb’s 1.5mn customers during a transition period from the date of the takeover on December 20 to March 31 this year.

The loans were intended to shield Octopus from the risk of potentially heavy losses from absorbing Bulb’s customers, as the government had not bought energy supplies for them in advance to cover the winter months.

Treasury rules had forbidden Bulb from hedging — or buying gas and power supplies in advance — during the year it was in state hands, a move that is contrary to standard industry practice. In exchange for the government loans, Octopus agreed to make repayments to the Treasury.

These were based on the cost of the wholesale component of the energy price cap, which governs how much households — including Bulb’s old customers — pay for their energy bills.

Sharp falls in the wholesale price of natural gas and electricity since the cap was last set mean Octopus’s repayments are higher than the costs to the government. This means the Treasury stands to make a net gain of £300mn from Octopus in January or £840mn in the three months to April based on prices this week. These are snapshot figures and are highly dependent on usage and energy prices, which could rise again.

“Although the prices are currently in the Treasury’s favour, they do fluctuate wildly,” said one government figure. Estimates of the total cost of Bulb’s rescue have varied hugely.

Last month, the government said it had set an upper limit of £4.5bn but the Office for Budget Responsibility has suggested a higher potential cost of £6.5bn. The cost of the bailout has been borne by taxpayers but the Treasury has said it will eventually be spread across almost every household’s energy bill. Households are already paying £94 each for the cost of 29 other failed energy suppliers.

Octopus has also agreed to pay the government about £200mn and to share the profit on any Bulb customers. The state loans will end on March 31 when all of the energy for Bulb’s customers will have been fully hedged by its new owners. Shell, which handles hedging for Octopus, started hedging for Bulb’s customers on December 20.

BEIS said “ensuring that we get the best outcome for Bulb’s customers and taxpayers remains our priority”. Octopus Energy declined to comment.

The Financial Times

Affordable electric cars ‘not viable’

A mass market in affordable electric cars will not happen soon because of the difficulty of producing them on a commercially viable basis, one of the largest makers of zero-emission vehicles for British drivers has warned.

Paul Philpott, UK chief executive of Kia, the fast-growing South Korean car company, said it had no immediate plans for a mass-market electric product.

Some fear there is a prospect of a society of haves and have-nots in the electric car revolution because of the sheer cost of buying or financing a zero-emission vehicle.

Philpott’s prediction also threatens to undermine the government’s ban on selling petrol and diesel vehicles by 2030.

With price inflation roaring ahead in the past couple of years, there are only a handful of electric cars available below £30,000, compared with the less than £20,000 that motorists would expect to pay for mass market or entry-level petrol cars. Even the smallest electric car, the zero-emission version of the Fiat 500, starts at about £30,000.

This month the Advanced Propulsion Centre, the government’s automotive electrification agency, significantly cut electric car forecasts for 2025 because “buyers are expected to stick with cheaper options for longer”.

While European and Asian manufacturers have been stepping up production of electric vehicles, they have been concentrating on more expensive models to make healthy profit margins on the cost of installing electrified systems. The battery pack is the costliest component of an electric car. The smaller the car, the larger the proportion the battery in its production cost.

Unveiling Kia’s product launches, Philpott outlined plans to increase the 16,000 electric cars it sold in the UK last year to more than 20,000 in 2023. But he conceded: “The electrification of the small car is really difficult, economically speaking.”

Philpott conceded that the imminent arrival of cheaper-priced Chinese brands into the British market could be a catalyst for change.

The Times

Inside Britishvolt’s collapse: yoga, flash cars and broken dreams

Bosses splurged on electric Porsches, hundreds of staff and a director of wellbeing. But they never made a single battery. The collapse of a startup once valued at $1 billion (£800 million), and billed as the great hope of the British car industry, has sent shockwaves through northeast England, where the company’s £4 billion gigafactory was to be built, down to Westminster and beyond.

It has thrown up tales of reckless spending on company Porsches and extravagant salaries while the firm struggled to land a major customer.

Read the full article in The Times

Liv Garfield tipped for top job at Vodafone

Liv Garfield, who has headed Severn Trent since 2014, could make a dramatic return to the telecoms sector as the replacement for recently ousted Vodafone boss Nick Read, according to City sources.

The 47-year-old spent three years as chief executive of BT’s broadband division Openreach, where she spearheaded the company’s rollout of fibre internet.

April will see her complete nine years at Severn Trent – the suggested maximum a director should serve on a company’s board, according to the UK’s corporate governance code.

Other candidates include Olaf Swantee, the former boss of mobile network EE, and Virgin Media O2 head Lutz Schüler.

There is also speculation Vodafone could give the job to its interim chief executive and chief financial officer Margherita Della Valle, although that might prompt a backlash from some investors.

This is Money

Taxpayers will fund wind farms for North Sea firms, say critics

Taxpayers effectively will pay oil and gas companies to build wind farms to supply their North Sea platforms because of generous new tax breaks, critics have claimed.

The government has been urged to ditch the proposed investment relief that will enable firms to claim a £109 tax break for every £100 they spend on decarbonising their assets.

The new tax break is due to be introduced through legislation promised in the spring.

Tessa Khan, executive director of Uplift, the campaign group, said that oil and gas companies should not be “hitting up the public for the costs of cleaning up their operations at a time when they are already making obscene profits at our expense”.

She urged the government to “ditch this massive subsidy for international oil and gas companies in the spring budget”.

The incentives on offer are far more generous than investment relief available for putting money into other wind farms. Dan Roberts, director of Frontier Economics, a leading consultancy, said: “A similar wind farm investment might end up looking much better in one place than the other and that’s just a bit bizarre.” He suggested the government could address this “inconsistency” by introducing comparable tax relief for power companies, which also have been hit by a windfall levy.

The government imposed the energy profits levy on the North Sea oil and gas industry in May, increasing the effective tax rate from 40 per cent to 65 per cent. It also sought to head off concerns that the windfall tax would deter investment by introducing a generous tax break that gave oil and gas companies £91 tax relief for every £100 they invested.

In November the government said it was increasing the levy from this year, taking the effective tax rate to 75 per cent and extending it until 2028. It also reformed the investment allowance so that the rate per £100 invested remains at £91 for most projects but increases to £109 relief for every £100 of “decarbonisation expenditure” in the North Sea. This includes “modifying existing installations to use power from offshore wind farms, installing bespoke wind turbines to power the installation or running electricity cables to the installation from shore”.

Most oil platforms are powered using their own gas or diesel generators. In 2021 the North Sea oil industry committed to invest £2 billion to £3 billion by 2030 in connecting platforms to the grid or to renewable power sources to help to meet a goal of halving operational emissions this decade. The tax relief on such investments therefore could reduce the Treasury’s windfall tax take by billions of pounds, depending on the timing of the investments.

The Times

Britain’s rivers to be designated bathing sites in major protection move

Ministers should designate more waterways as bathing sites in a bid to protect the nation’s rivers, Tory MPs and peers have warned.

More than 40 Conservatives have called for the Government to set a target for at least 22 new local inland bathing sites across England every five years,

This will help empower communities to clean up their rivers and help people swim safely.

Siobhan Ballie, Tory MP for Stroud, said: “More people enjoying wild swimming has naturally driven efforts to clean up our seas, and they can do the same for our rivers too.

“Designating bathing sites makes it easier to hold water firms to account for the health of our rivers, ensuring they tackle pollution so communities can enjoy our rivers and wildlife can thrive.

“With so few stretches of rivers designated, a target for establishing more bathing sites is needed to bring safe swimming to more places.”

Only two stretches of English rivers have bathing water status – the River Wharfe at Ilkley, West Yorkshire, and Wolvercote Mill at Port Meadow, Oxford.

Polluters and water firms are held to account because the waterways are consistently monitored to ensure swimmers’ safety.

England’s rivers and lakes suffer from a toxic chemical cocktail of pollutants, with only 16% in good condition.

Andrew Jones, Tory MP for Harrogate and Knaresborough, said: “More and more places want bathing water status to detect pollution, ensure our rivers are monitored and give people the information they need to swim safely.

“Only two places along English waterways have been designated, so creating a target will ensure this status protects more of our precious rivers.”

The Express

Businesses berate ‘scattergun’ approach to UK government energy support

Groups representing more than 100,000 UK firms have accused ministers of taking a “scattergun” approach to supporting businesses with their gas and electricity costs, amid fears many will be forced to close this year by unaffordable bills.

Earlier this month, the chancellor, Jeremy Hunt, confirmed that the scheme designed to soften the blow of soaring monthly payments for energy would become significantly less generous from April.

In a letter to business secretary Grant Shapps, industry bodies including the Association of Convenience Stores (ACS), the Federation of Small Businesses, and UK Hospitality urged the government to rethink its approach to let firms renegotiate contracts agreed when wholesale gas prices peaked last summer.

It has been estimated that firms that signed fixed price energy contracts between August and October last year will receive a discount of between 25% and 55% on electricity under the existing scheme running until April. After that, most businesses will receive discounts of only 0.7% off their gas and 2% off their electricity bills.

In the letter, seen by the Guardian, the industry bodies say: “We are urging [the business department] and Ofgem to encourage energy suppliers to allow the most vulnerable businesses to renegotiate or ‘blend and extend’ their energy contracts to reflect significantly lower wholesale prices now available.”

They argue that businesses should have the right to renegotiate contracts with energy suppliers if they can prove they signed the contract at high prices and that the contract ends after the existing government scheme concludes at the end of March.

Wholesale gas prices began to rise in late 2021 and soared after Russia’s invasion of Ukraine in February 2022, peaking in August amid concerns over winter gas supplies. Gas prices have fallen in recent weeks but that drop has yet to feed into domestic and business bills as suppliers buy their energy in advance.

James Lowman, chief executive of the ACS, said: “The government has failed in its attempt to come up with a solution to help businesses that need urgent support on energy costs, instead opting for a scattergun approach that won’t make a dent in the bills of thousands of shops facing huge hikes in their energy bills this year.

“Without urgent intervention to allow businesses to renegotiate fairer contracts, local shops will be forced to close their doors in numbers.”

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.