Weekend press round-up: Government orders review of regulators

In our latest review of sector coverage across the national newspapers, an MP who called for the abolition of Ofgem and Ofwat has been appointed to lead a review of Britain's competition laws. There is also speculation on the contents of the energy white paper, ahead of a flagship speech on the net zero pathway by Boris Johnson.

Former minister to review UK competition laws ahead of autumn Budget

A Tory MP who called for the abolition of the energy and broadcasting watchdogs has been appointed to lead a review of Britain’s competition laws.

John Penrose, a former minister who described Ofcom and Ofgem’s powers as “as out of date as the horse and cart”, is understood to have been asked to draw up proposals to address the problem in time for Rishi Sunak’s autumn Budget.

The move suggests senior ministers are mulling an overhaul of the country’s competition laws and regulators, which Mr Penrose claimed have allowed consumers to increasingly “end up paying more than they used to for the same things” and make the economy “less efficient and productive”.

In a 2018 pamphlet, Mr Penrose proposed scrapping the current communications, energy and water industry watchdogs and replacing them with a single body that would also cover tech giants such as Google and Facebook.

It comes after Chancellor Mr Sunak – who ordered the review along with Alok Sharma, the Business Secretary – said he wanted to “turbo-charge our competition policy to make sure it is fit, especially for the digital age”.

Mr Penrose’s pamphlet on “rebooting capitalism” included a chapter proposing the introduction of a new Competition Act as part of a plan to “shift the balance of power back to customers and citizens”.

In the essay, reproduced on the ConservativeHome website, he warned that many consumers felt capitalism was “stacked against them by a complacent, comfortable, out-of-touch global elite” that rewards itself but appears to exploit some lower-skilled workers.

He wrote: “Energy firms rip off loyal customers with sky-high prices as soon as they forget to switch; railways are crippled by strikes and new timetables cause meltdown; water firms don’t fix leaky pipes but still impose hosepipe bans; broadband works slower than it’s supposed to.”

Mr Penrose said the solution was to “make the customer king again” and ensure that people have the ability to switch from one company to another that is “cheaper, or better quality, or faster, or slower, or has kinder staff”.

He added: “Britain’s competition watchdogs don’t have the resources they need to reverse the current trends and make British competition sharper and tougher, particularly after Brexit when they will have to take over areas which are currently covered by EU Competition authorities in Brussels.

“And their powers are based on the UK’s most recent Competition Act, which was passed in 1998, in the era before email, Facebook, Twitter, Uber and the World Wide Web. They’re as out of date as the horse and cart.

“Both the watchdogs and their powers must be updated to cope with these new economy challenges so consumers get the huge advantages and benefits which the digital economy can offer without being exploited in new ways at the same time.

“We will need a new Competition Act, enforced by a modernised and expanded Competition and Markets Authority. Plus a specialist new network monopoly regulator to replace Ofcom, Ofgem, Ofwat and all the others.”

The Daily Telegraph

Floating wind farms will help country to hit net-zero carbon emissions target

Boris Johnson is preparing to back floating wind turbines and greener steel plants to help Britain to meet its carbon reduction targets.

The emerging technologies are the frontrunners as Mr Johnson looks for emission-cutting projects that deliver jobs and investment to “red wall” seats. Rishi Sunak, the chancellor, meanwhile, is ready to give firms a full tax break on capital investment in the budget in a move that would help to foster cleaner technology.

Mr Johnson is to deliver a speech setting out how the UK will reduce net carbon emissions to zero by 2050. Whitehall departments were given until last Friday to submit proposals to be included in the address. He must decide whether to bring forward to 2030 a ban on new petrol and diesel cars and how quickly to phase out gas boilers, policies that are likely to be politically difficult, especially in seats in the Midlands and north that the Tories won from Labour last year.

Downing Street is also expected to disclose that Mr Johnson plans to use new post-Brexit state-aid freedoms to foster green industries for coastal and post-industrial communities.

Senior ministers are keen on floating wind turbines that could slash the cost of offshore wind energy. The Crown Estate, which controls the energy development rights of the UK coast, approved plans for a pilot project off the Pembrokeshire coast last month. Floating wind farms, in waters too deep for turbines and using technologies from the offshore oil and gas industry, open possibilities for more ocean territory.

Mr Johnson may announce the first UK electric arc furnace to recycle steel. Backers say that the plants reduce emissions but green groups will want the UK to back a pilot scheme to make steel using greener technology.

Details of both schemes are to be set out in an energy white paper this autumn.

The Times

BP warns of oil demand peak by early 2020s

UK energy major BP has warned of a peak in oil demand within the next few years, signalling that the coronavirus pandemic is ushering in an earlier than anticipated decline for the fossil fuel era.

The company, in its annual energy outlook published on Monday, modelled three scenarios for the world’s transition to cleaner fuels that all see oil demand falling over the next 30 years.

In the “business as usual” case, which assumes government policies, technologies and societal preferences evolve in a manner and speed as in the recent past, oil demand rebounds from the Covid-19 hit then plateaus in the early 2020s.

In two other scenarios that model more aggressive policies to tackle climate change, oil demand never fully recovers, implying 2019 levels of 100m barrels a day will be the peak for consumption.

The new report marks a dramatic change from last year when BP’s base case expected consumption to grow over the next decade reaching a peak in the 2030s.

The oil industry is assessing how much of the nearly 10 per cent slump in demand this year, triggered by government lockdowns and travel bans, will become permanent as work and travel patterns shift.

Bernard Looney, who became chief executive in February, said the report was “instrumental” in developing BP’s new corporate strategy for the energy transition, even as the company said the scenarios are not predictions of what will happen.

Mr Looney told the Financial Times “it was very difficult to know” how the oil market trajectory will bear out, but it was possible that demand had hit its maximum level. “Could it have happened? It could have,” he said.

BP said in August it will reduce production by 40 per cent and increase renewable energy spending 10-fold by 2030 as it plans to become a net-zero emissions company by 2050.

In the report, BP’s “rapid” scenario assumes the introduction of policy measures, such as a massive increase in carbon prices and a drastic reduction in emissions. Its “net zero” scenario — the most extreme — is broadly in line with reaching Paris climate goals of limiting global warming to 1.5C.

The Financial Times

Less than half of switching customers properly refunded by energy suppliers

The energy regulator put new rules in place earlier this year to help households get any credit back from their old supplier if they switch – but these rules aren’t working, new research has revealed.

Customers have been left waiting for months to get their money back, according to data from Which?, with just six per cent receiving the compensation they should for the late arrival.

The survey revealed that two thirds of households that have switched supplier since May 2019 were due outstanding credit from their previous supplier.

Of those, only 46 per cent of delayed customers were refunded in line with Ofgem’s rules, that state they should be refunded any credit left on their account at most 10 working days after switching.

If the process takes longer, the energy supplier should automatically pay you £30 in compensation.

In May 2020, Ofgem also introduced guaranteed standards that said customers should get a final statement or bill within six weeks of switching supplier.

Which? surveyed 538 members online in June and July 2020.

It found that more than a third had to wait longer than 10 working days to receive their money, leaving hundreds of people trying to claw their money back from their previous suppliers.

Ofgem’s own compensation figures suggest that fining energy firms for delays hasn’t stopped set backs happening.

Energy providers forked out £1.2million in compensation in the six months from May to December 2019 alone with £850,000 handed out specifically for overdue credit refunds.

Mail on Sunday

Nottingham city council’s failed energy firm leaves £60m black hole

A town hall that charges among the highest rates of council tax in Britain is planning swingeing cuts to services after its failed attempt to run an energy company left it with crippling debts of more than £60m.

Robin Hood Energy, which counted the former Labour leader Jeremy Corbyn as a customer, was set up by Nottingham city council in 2015 with the aim of offering cheaper deals to customers.

However, it was managed by Labour councillors with no experience of running a supplier and was forced repeatedly to plead for extra taxpayers’ money. Last week it was bought in a rescue deal by British Gas for an undisclosed sum.

A damning report by the council’s auditors, the accountants Grant Thornton, seen by The Sunday Times, warns: “This is not how local authorities should look after large amounts of public money.”

It said Nottingham’s failed energy venture “will have a direct impact on the council’s financial reserves and leave it with a need for more challenging savings plans.”

Grant Thornton is legally obliged to warn the council of any concerns that it has about the mismanagement of public funds.

The council is now in consultation about ways to cut £12.5m of spending to help plug a £62m “budget gap” in its finances, which it blames on the government’s “failure to fully cover the costs of the Covid pandemic” as well as a “decade of austerity”. The consultation document makes no mention of the council’s mismanagement of Robin Hood.

The company’s problems, however, will have the biggest impact on Nottingham residents who helped to prop it up for years.

Grant Thornton told the council that the need for “service cuts or increased efficiencies has thus been significantly increased directly as a result of the financial performance of Robin Hood Energy”.

The Grant Thornton report states there was an “institutional blindness” over “the escalating risks involved, which were ultimately very significant risks to public money”. Where concerns were raised by some individuals, it added, “these concerns were downplayed and the resulting actions insufficient”.

In total, the council invested £43m of public funds into the supplier and risked a further £16.5m in loan guarantees, the report states.

Andrew Rule, one of the two Conservatives in the Labour-run authority, said the council had “used council reserves to support their failed Robin Hood Energy project. In doing this they have used funds that would otherwise have been available to help them meet the pressures from the pandemic.”

Sunday Times

UK must become global leader in tackling climate crisis, says CBI

Britain needs to step up and become a global leader in climate action, creating a number of green jobs and boosting productivity to help the economy recover from the coronavirus pandemic, the CBI will say on Monday.

Launching the organisation’s “green recovery roadmap”, the CBI’s director-general, Carolyn Fairbairn, will call on the government to take ambitious steps nationally and use the rest of this year to reignite global efforts to achieve net zero carbon emissions by 2050.

Its recommendations to the government include creating jobs and energy savings by retrofitting homes and buildings to be more energy-efficient, pumping money into the development of sustainable aviation fuels, and kickstarting the creation of a hydrogen economy in the UK as part of efforts to find new, cleaner ways to heat the UK’s homes and businesses.

In the run-up to the autumn budget a growing number of organisations are putting forward their demands and wishlists aimed at stimulating job creation, supporting millions of households at risk of unemployment or financial difficulty and tackling the climate emergency.

Fairbairn is expected to say that this feels like a time of fiercely competing goals, with the world facing two seemingly separate yet fundamental problems: Covid-19 – the biggest health crisis in living memory – and climate change, the defining challenge of the modern era.

“But they are not separate – the response to one affects success on the other. And the defining question is: how does the UK use this moment to rebuild our economy and the greener and stronger world we want to return to?” she will say.

The CBI roadmap recommendations to the government include publishing the energy white paper and national infrastructure strategy this autumn to unlock business investment. Both have been delayed.

The Guardian

Scottish Water sets out renewables route map to net-zero emissions

More renewable energy, tree planting and peat bog restoration will help Scottish Water reach net-zero by 2040, the organisation has said.

Scotland’s biggest user of energy has set out its plan for decarbonising five years ahead of the government’s target.

It says a huge shift to green electricity requires major investment and bills will have to go up.

It comes as the Scottish government sets out legislation requiring public bodies to set net-zero target dates.

More than a billion litres of water is consumed daily in Scotland and shifting it around uses lots of energy.

The whole operation generates about 250,000 tonnes of carbon dioxide (equivalent) – the same as 40,000 car journeys around the world.

But already some sites, like the Erskine waste water treatment works, are being redesigned to be powered by solar panels.

Others facilities are being replaced with ones using more efficient treatment methods.

Scottish water operates 239 drinking water treatment works and 1,827 waste water sites across Scotland.

It plans to power all of them from renewables within the next 20 years.

Chief executive Douglas Millican said: “This will not be easy. We have a substantial emissions footprint due to the large amounts of electricity and chemicals we use.

“This route map is about doing everything possible to minimise the emissions associated with our activities, irrespective of where they are generated, and maximise the positive contribution we can make.”

BBC News

Nuclear power and hydrogen ‘may cut climate change’

Using nuclear power to generate hydrogen could help limit global warming and clean up heavy industries, a report has claimed.

Hydrogen is rapidly turning into the holy grail for environmentalists and big oil companies alike, because the only by-product of its combustion is water. The government is committed to the UK achieving net zero carbon emissions by 2050.

The report, by consultancy LucidCatalyst, claims that nuclear power could create hydrogen and “decarbonise aviation, shipping, cement and industry using … proven technologies”. For hydrogen to be affordable and clean, it says, the gas “must be generated from non-fossil sources, at a price which is competitive with cheap oil”.

It reckons the cost of this transition globally would be about $17 trillion by 2050 — versus $70 trillion if renewables such as wind and solar power were used.

The nuclear industry is on a last-ditch lobbying push as ministers prepare to publish a much-delayed energy white paper that will explain how they plan to cut emissions while keeping the lights on — as well as powering the growing fleet of electric cars.

Companies including France’s EDF and Japan’s Hitachi have warned they will need state funds to support the construction of a new generation of nuclear plants.

The Times reported last month that EDF was exploring plans to produce hydrogen or suck CO2 from the atmosphere using surplus power and heat from its proposed £20bn Sizewell C nuclear plant in Suffolk.

Duncan Hawthorne, chief executive of Horizon Nuclear Power, which hopes to build Hitachi’s plant on Anglesey, said it would be a “destiny year for us”.

The report proposes using electrolysis — passing an electric current through water — to create hydrogen. That could be burned, or combined with nitrogen to make ammonia, which could be used in ships’ engines.

The Sunday Times

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.