Weekend press: Energy firms face investigation into bill profiteering

Utility Week's latest roundup of national news from the weekend includes a BEIS investigation into energy firms accused of 'profiteering' by charging some businesses inflated prices for fixed-rate gas and electricity; elsewhere Rishi Sunak will advise world leaders to move faster on renewable energy at COP27; and the Liberal Democrat's leader attacks Ofwat over river water quality.

Energy firms face investigation into bill ‘profiteering’

Whitehall officials are investigating possible profiteering by energy companies amid claims that some suppliers of gas and electricity are charging inflated prices for fixed-rate deals.

Ministers launched the Energy Bill Relief Scheme last month to help businesses cope with soaring energy prices.

However, the trade body UKHospitality complained that the difference between the price that energy companies were paying for power on the wholesale market and how much they were charging their customers had soared, despite government intervention. This had resulted in businesses being quoted deals “substantially” above the wholesale cost, it claimed.

Kate Nicholls, the body’s chief executive, said that there was “no reasonable explanation for this colossal increase in margins”. She wrote to Grant Shapps, the business secretary, last week to call for a probe by the Competition & Markets Authority and the energy regulator Ofgem before Christmas, adding: “There needs to be an avoidance of doubt that energy suppliers are profiteering from the current crisis.”

The Department for Business, Energy & Industrial Strategy said: “We are aware a small minority of businesses have reported that some energy suppliers have set prices that undermine the benefits of the Energy Bill Relief Scheme. We are working with Ofgem to ensure licence conditions have not been breached and businesses are able to see the full effects of the support.”

Under its support scheme, the government put in a price cap on businesses’ energy costs to give them a rebate on bills. This is calculated from a daily price based on the wholesale market.

Last week the price for electricity was set at 53p per kWh. However, hospitality businesses have reported receiving quotes of up to 80p per kWh for fixed electricity contracts.

At present, businesses get a government rebate on their bills, but this system ends in April. The concern is that businesses arranging longer term contracts could be locked in to paying much higher rates. Meanwhile, wholesale gas prices have fallen in recent weeks.

UKHospitality also complained of a lack of choice in the market and of suppliers demanding “excessive” deposits to take on new customers.

The Times

COP27: Rishi Sunak urges world to move faster on renewable energy

Prime Minister Rishi Sunak is set to urge world leaders at COP27 to move “further and faster” in transitioning to renewable energy.

Mr Sunak will travel to Egypt on Sunday for the UN climate summit after U-turning on a decision not to go.

In his address on Monday, he will say Russia’s invasion of Ukraine “reinforced” the importance of ending dependence on fossil fuels.

COP27 follows a year of climate-related disasters and record temperatures.

The prime minister will also tell leaders gathered in Sharm el-Sheikh not to “backslide” on commitments made at last year’s COP26 summit in Glasgow intended to prevent global temperature rises to 1.5C above pre-industrial levels.

But Petteri Taalas, secretary general of the World Meteorological Organisation (WMO), has warned that the 1.5C target is “barely within reach”.

His comment comes as the UN’s weather and climate body released a report showing that the rate at which sea levels are rising has doubled since 1993.

UN Secretary General Antonio Guterres has described the report as a “chronicle of climate chaos” and urged governments at COP27 to answer the planet’s “distress signal” with “ambitious, credible climate action”.

Mr Sunak will meet French President Emmanuel Macron at the summit this week and the topic of migrants crossing the Channel in small boats will likely be raised.

The BBC

Why high UK energy bills were decades in the making

In a year of soaring electricity bills and fears of blackouts, energy has become the subject of a bitter blame game.

The world is in the grip of a global energy crisis, sharply exacerbated by the war in Ukraine and the strain that has placed on the supply of gas, a major resource.

But household energy costs are higher in the UK than almost anywhere else in Europe. How has it come to this?

Looking back at decades of political decisions, former energy ministers and industry experts have told the BBC where they think some mistakes were made.

For decades now, UK governments have bet on gas to keep the lights on and our homes warm.

Our appetite grew in the 1990s, when a fossil-fuel frenzy in the North Sea set off what was dubbed the “dash for gas”. As that dash slowed to a stroll, the UK became a net importer of gas in 2004 and reliant on supplies from friendly countries such as Norway.

Adam Bell, who was head of government energy strategy until last year, said there was an assumption that global supplies of gas “were always going to be deep”.

Mr Bell said the government “wasn’t thinking of potential downside scenarios”, leaving the UK vulnerable to this year’s stratospheric rise in gas prices.

Did anyone see this coming earlier? Brian Wilson, who served as an energy minister in Tony Blair’s Labour government from 2001 to 2003, claims he did.

Mr Wilson remembered one sobering forecast that “always stuck in my mind”, a projection of almost total reliance on gas imports from Russia. Though it never came to pass, becoming heavily dependent on gas “was something I didn’t think was a great idea”, he said.

The energy regulator, Ofgem, didn’t think so either. In 2009, Ofgem produced an unsettling report, which flagged dependency on gas imports as a key risk to energy security.

The founder of Stag Energy, George Grant, had one idea to mitigate this risk. It involved drilling into salt caves beneath the East Irish Sea Basin to build gas storage for a rainy day.

Ministers were initially enthusiastic about the Gateway Project and planning permission was granted in 2008. Then the financial crisis hit, choking off investment.

While Mr Grant kept making the case for Gateway, David Cameron’s government felt “there was not a need to intervene to support more gas storage”.

Without state support, his project was sunk. Then the government went even further, ruling out any public subsidies for gas storage. It meant no state handouts for Rough, the UK’s largest gas storage facility, which was unable to afford engineering upgrades and was mothballed in 2017.

The no-subsidy policy was “absolutely” short-sighted, Mr Grant said, particularly because the government has since asked him about the possibility of reviving Gateway and pushed for Rough to reopen.

Had we invested in gas storage sooner, “we would have been much more protected this winter”, said Charles Hendry, a former Conservative energy minister.

The choice not to had consequences for the UK’s energy security, as it did in the nuclear industry.

In the 1990s, nuclear power generated about 25% of the UK’s electricity. Since then, the industry has been in decline, with almost half of the UK’s current nuclear capacity due to be retired by 2025.

Notoriously expensive and complex to build, nuclear projects have been kicked around like radioactive footballs by generations of politicians.

“I will diagnose the problem,” former Prime Minister Boris Johnson said, announcing state funding for a new nuclear power station earlier this year. “It’s called myopia.”

He said the culprits were Labour and the Liberal Democrats, whose former leader Nick Clegg snubbed nuclear in “a famous video” from 2010.

Twelve years on, some would argue that the UK could do with a new nuclear plant or two.

Read the full article on the BBC 

UK campaign on energy ‘could save the Treasury £9bn’

A public information campaign to encourage consumers to cut their gas usage this winter could save households nearly £400 and the Treasury £9bn, a study has shown.

An analysis by the cross-party thinktank the Social Market Foundation found that households could save between £250 and £400 a year if a UK campaign similar to Germany’s national energy-awareness drive were launched.

The government has been criticised for not advising consumers to cut their gas and electricity consumption this winter in the face of high energy bills and concerns about power cuts. Germany was far more reliant than Britain on Russian gas before the invasion of Ukraine and its government has acted to conserve energy usage amid fears that the Kremlin may decide to cut off gas supplies entirely this winter.

Lights in some public buildings in Germany have been switched off, and in September the government launched a drive to encourage households to reduce their heating. The country’s gas consumption has since dropped to between 20% and 37% lower than in previous years.

Britain is exposed to high prices and increased competition for gas as a result of the European crisis, leading to calls for a national effort to reduce consumption.

The Guardian revealed last month that Liz Truss’ government was ready to push the button on a formal campaign but decided against it. It later emerged that Jacob Rees-Mogg, then business secretary, signed off a “light touch” £15m campaign to save consumers £300 a year on energy bills but the move was blocked by Truss, who opposed a “nanny state” intervention.

A government information website, Help for Households, was later updated with information on reducing boiler flows and draught-proofing windows but there has been no full-scale campaign. Advocates of a campaign say it would help consumers save money and reduce the strain on the electricity network.

National Grid has said Britain could face three-hour rolling power cuts in a worst-case scenario. The government has also re-examined its Programme Yarrow plans in the event of a nationwide blackout.

Reducing energy use would also deliver significant savings for the public finances, as the energy price guarantee policy, introduced by Truss, now means that taxpayers subsidise every unit of energy used in the UK. Social Market Foundation analysis of UK government data showed a 20% reduction in gas consumption would save customers £261 and the government £6.2bn while a 30% cut would amount to £392 or £9.3bn.

The German campaign stops short of forcing households to cut consumption, merely offering advice.

Jake Shepherd, a senior researcher at the Social Market Foundation, said: “Far from ‘nannying’ people, government guidance would empower them and, most importantly, help them save on their energy bills. Reducing energy use would deliver significant savings for the Treasury, potentially reducing the pressure on ministers to find money elsewhere with tax rises and spending cuts.”

The Guardian

British Gas should be banned from installing ‘pay-as-you-go’ meters, MPs say

British Gas should be banned from entering customers’ homes and installing prepayment meters, MPs have warned, after the supplier obtained almost treble the rate of court warrants than industry averages.

Campaigners and politicians have called for an industry-wide moratorium to be implemented immediately after a Freedom of Information request lodged by The Telegraph showed British Gas was granted more than 186,000 warrants by HM Courts & Tribunals Service in the last five years to replace customers’ energy meters with prepayment alternatives.

MPs accused British Gas of a “heavy-handed approach”, claiming the number of warrants it has obtained is disproportionate to other providers.

British Gas is the biggest supplier in the country, but the 186,000 warrants issued represents 2.6pc of its current seven million customer base. This was almost treble the 0.9pc industry average, this newspaper can reveal.

Alexander Stafford, Conservative MP for Rother Valley and a member of the Energy Select Committee called for an “immediate moratorium” on providers entering homes under warrant.

“An Englishman’s home is his castle and for companies to enter homes like this, especially coming up to the Christmas period, is a national disgrace,” he said. “British Gas is clearly playing fast and loose, and should only ever enter homes in extreme circumstances.”

There can be major repercussions for customers switched to prepayment meters. They are typically more expensive than traditional meters, although all tariffs are temporarily being capped by the Government. Customers with prepayment meters also risk being effectively disconnected from the power network if their balance falls to zero. Customers with traditional meters are rarely cut off by suppliers.

Despite the Government implementing an energy price guarantee, millions of households are at risk of falling behind on their bills this winter as bills will be 64pc higher than last year. Energy providers can install a prepayment meter if any customer falls behind on their monthly payments, however regulator Ofgem said providers must give customers a month to settle debts, and another week’s notice before making the switch.

Consumer champion Martyn James said it was “inexcusable” for providers to consider cutting off customers’ energy supply unless it is “absolutely clear the person in question has abundant funds but is outright refusing to pay”. “It’s clear that this is being misused too often,” he said.

The Telegraph

Ofwat labelled ‘toothless’ after sewage spills in rivers

Water companies are routinely able to dump sewage in rivers in England and Wales because the regulator is “pointless” and lacks real teeth, the leader of the Liberal Democrats has said.

Sir Ed Davey said Ofwat should be replaced with a “proper watchdog” that will do whatever is necessary to clean up rivers. An analysis by the Liberal Democrats found that Ofwat’s three top-rated companies dumped sewage into rivers 177,000 times in 2021 for a combined total of 1.2 million hours.

Yesterday he said: “[The Conservatives] have let water companies get away with pouring their filth into our rivers and continually rejected Liberal Democrat proposals to act — from our sewage tax to our ban on water boss bonuses.

“Ofwat has been their powerless accomplice, giving these companies a passing grade or even a gold star as they continue to pollute our environment.

“So I’m calling on the government to abolish Ofwat and set up a proper watchdog with real teeth, to do whatever it takes to stop the sewage. To compel them to finally clean up our rivers. So that everyone can enjoy the wonderful natural beauty our country has to offer. That’s the fair deal I’ve been talking about.”

An Ofwat spokesman said it was “working with all interested parties to help drive change and to hold companies to account” and pointed to £500 million of fines it had issued “in the last few years”. “Water companies need to change and we are using all our powers and resources to deliver that,” the spokesman said.

Davey said that millions of homeowners were paying a “Conservative property premium” as a result of the “chaos” the party had unleashed on the economy. He said the government did not have a “shred of credibility” after the turmoil of recent weeks as he reiterated his demands for an immediate general election.

The Times

Ministers have no idea how many beaches in England shut due to sewage

The government has no idea how many beaches in England have been shut due to sewage pollution this year, ministers have admitted.

This summer, scores of beaches across the country were forced to close in high season after raw sewage was dumped into the sea near the coast. Surfers Against Sewage found that in August alone, at least 90 beaches across the country had been sullied by sewage.

Just last week, the Cornish beauty spot St Agnes saw its blue waters polluted to a murky brown colour after waste was spilled into the sea.

The Conservative government has claimed water quality is a “top priority” and that current sewage pollution levels are unacceptable, but despite this, Defra minister Trudy Harrison admitted that beach closures are not even being monitored. In a parliamentary answer this week, she said: “Neither [Defra] nor the Environment Agency holds information on the number of beach closures due to sewage pollution in England.”

A second question tabled by Labour’s shadow environment secretary Jim McMahon also disclosed that the government has not conducted any impact assessments into how allowing sewage pollution affects tourism and coastal businesses financially.

McMahon told the Observer: “Whilst the Tories continue their game of prime minister pass-the-parcel, Labour has a clear plan to protect our coastal communities from filthy raw sewage, by forcing water firms to clean up their act.

“Families across the country should be able to enjoy where they live, work or holiday, and businesses should not have to worry about the Tory sewage scandal hitting their trade.

“A Labour government will use the levers of power to hold reckless water bosses to account and toughen regulations to prevent them from gaming the system.”

Amy Slack, head of campaigns and policy at Surfers Against Sewage, added: “This news comes as no surprise as it’s entirely in keeping with the government’s laissez-faire approach to sewage pollution. Until those in power show they are serious about cracking down on the profiteering polluters of the water industry, sewage will continue to be dumped into the UK’s rivers and seas, at huge cost to public and environmental health. Now that the lid has been lifted on the sewage scandal, people across the country are rising up and demanding an end to sewage pollution.”

In the summer, Labour revealed that on average water companies in England and Wales are pumping raw sewage into our natural environment every two-and-a-half minutes, with areas such as beaches, playing fields and bathing waters affected over a six-year period.

The Guardian

Lithium groups choose Teesside in boost for UK battery industry

A pair of battery materials start-ups have selected Teesside to locate key parts of the electric vehicle supply chain at a time of uncertainty over the industry’s future in the UK.

Trafigura-backed Green Lithium has selected Teesport, the UK’s fifth largest port, for its £600 million lithium refinery, while Altilium Metals will also build a recycling facility in the region.

The projects are a boost for the north-east but come as the UK’s aspirations to become an EV manufacturing powerhouse are in turmoil after the near-collapse of battery start-up Britishvolt last week. Its planned £3.8 billion gigafactory is one hour’s drive north in Blyth.

The new occupants are also a fillip for Teesport owner PD Ports, recently at the centre of a takeover attempt by local mayor Ben Houchen which sparked a legal battle with investment giant Brookfield Asset Management.

In a region with high unemployment, Green Lithium’s project is expected to create 250 permanent jobs and 1,000 during construction, while the recycling plant will hire between 100 and 200 people. Middlesbrough currently has the ninth highest unemployment rate in Britain, according to the Office for National Statistics.

Lithium is produced in two main ways: hard rock is dug up from mainly Australia and refined in China or brines rich in the dissolved mineral are slowly evaporated in Chile and Argentina. Almost 90% of refining capacity for hard rock is based in China, giving the country significant leverage in the event of geopolitical turmoil or severe lithium shortages.

“We need China more than China needs us,” said Sean Sargent, chief executive of Green Lithium. “Only 35% of Chinese production goes into their [EV] production but by the time we go into production they could divert it all into their own EV industry.”

With rising concerns over the Britishvolt project, Sargent expects most of Green Lithium’s output to go to Europe when it begins operations in 2025 but increasingly stay in the UK later into the decade.

“The gigafactory delays are not ideal for these projects,” said Adam Panayi, managing director of Rho Motion, a battery consultancy. “But over a long term horizon, it’s likely that a battery manufacturing factory will be built there and long-term prospects for the businesses are still strong.”

The Financial Times

National Grid payments for cutting electricity use to start ‘in the coming days’

Households could be paid for cutting their teatime electricity usage as soon as next week after National Grid launched a scheme to help prevent blackouts this winter.

The company responsible for keeping the lights on said its new “demand flexibility service” had received approval from Ofgem and it aimed to carry out the first test “in the coming days”.

Households that take part will be paid at least £3 for each kilowatt-hour of electricity they avoid using during the test events, which are expected to last for one hour between 4pm and 7pm.

National Grid said “a typical household could save approximately £100” based on taking part in a maximum of 12 test events this winter. Energy savings will be calculated using smart meter data to track how much the household typically uses in that period. People can only take part if they have a smart meter and their energy supplier signs up.

The scheme forms part of National Grid’s efforts to shore up energy supplies, after Russia curtailed gas supplies to Europe, casting doubt on Britain’s ability to import gas and electricity from the Continent. The UK could face rolling blackouts for three hours on weekday evenings in winter if it is unable to secure enough gas to keep power plants running, the company has warned. It is hoping to reduce peak electricity demand by at least 2 gigawatts using the new demand flexibility scheme.

National Grid estimates that a typical household shifting use of domestic appliances could be paid at least £3 for each test, or up to £36 over the winter, while a household adjusting electric vehicle charging times could be paid £21 each test, or up to £252 over the winter. It said its £100 figure was an “approximate average”. E.On estimates that households could save £100 if they take part in the scheme on 29 occasions, while Octopus, which assumes a higher price will be paid, has estimated £100 savings if they take part on 25 days.

The boss of National Grid will not be taking part in the company’s scheme to avoid peak-time power usage because his energy supplier hasn’t signed up.

“My supplier hasn’t offered it to me,” John Pettigrew told The Times, declining to identify his supplier.

While E.On and Octopus Energy have both begun recruiting customers, most other suppliers are yet to sign up.

The 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.