Theresa-May-Tory-Party-Conference-energy-prices-681308

UK’s cheapest energy supplier closes doors to new customers

The independent energy company behind the retail market’s cheapest deal has shut its doors to new consumers amid concern over its mounting complaints and wafer thin cash reserves.

Iresa Energy is one of almost fifty challenger brands to the big six legacy suppliers but it has set itself apart by offering a rock bottom dual fuel supply tariff at an average price of £834 a year.

However, the company has slammed the brakes on its rising popularity after the regulator warned the company to get a handle on an increasing number of complaints from its customers.

“We told Iresa they needed to resolve this problem and have asked them to explain to us how they will ensure that it is easy for their customers to contact them and provide them with a level of customer service they are entitled to,” he said.

Iresa was not available to comment on its customer service or its decision to close the supplier to new customers.

The company’s meagre cash balance has also raised concern that Iresa may be the next casualty of rising energy company costs after the collapse of GB Energy due to the steady rise of wholesale market prices and other costs.

Iresa held just over £12,300 in cash and debt of almost £90,000 at the end of 2015 according to its most recent publicly available financial results which were posted to Companies House in September.

Ofgem has raised hackles among established energy companies by stopping short of setting minimum collateral requirements for new suppliers.

Instead it oversees a scheme which bails out the customers of failed energy companies using a safety net paid for by other suppliers, many of whom may have lost customers to under-funded suppliers offering unsustainably cheap deals.

Theresa-May-Tory-Party-Conference-energy-prices-681308

A Consensus Busting Election on Energy Policy?

Contradicting months of definitive denials about the prospect of a general election, Prime Minister Theresa May announced a snap election this morning, set to take place on 8 June. Purdah could commence on the 4th May five weeks ahead of election day.

It is widely expected that the election will be dominated by Brexit. That’s no great surprise. But the presence of so dominant a single issue, and in the context of an opposition in obvious difficulties, the real question is what latitude this gives to the Conservative Party to push the envelope on other policy areas? These factors leave plenty of less illuminated space in their manifesto, to pursue what would otherwise be considered difficult or controversial policies. The temptation is obvious if these positions are likely to poorly scrutinised or challenged by opposition parties with eyes on internecine warfare (Labour) or on Brexit (Liberal Democrats). One area of obvious attraction to certain parts of the Conservative Party will be to continue to erode levels of commitment to dealing with climate change, and to decarbonisation.

The Conservative journey down this road has already begun, and continues a pathway set out in the last election manifesto in 2015.The Cameron era manifesto centred on “affordable, reliable energy” being “critical to our economy, to our national security, and to family.” Specific pledges included banning any new onshore wind and promoting competition through implementing the recommendations of the Competition and Markets Authority investigation.

We have already seen the abandonment of Carbon Capture and Storage competition, the erosion of financial support for renewables and the sudden change to Levy Exemption Certificates. In the last few weeks we have heard rumours that the government are effectively set to abandon their pursuit of the EU 2020 targets, and very powerful conservative voices put their names to the recent House of Lords report on energy policy that urged the journey towards prioritisation of cost and security of supply to accelerate. Furthermore, statements from BEIS and the Prime Minister about Big Six price rises being “unacceptable” may signal a manifesto commitment of action on energy prices and reinforce the weighting given to affordability ahead of carbon reduction.  The political spotlight generally has recently fallen on domestic energy prices in recent weeks and months though, and give the recent Parliamentary debate on the issue that garnered cross party support for intervention, we would expect all party manifestos to include a pledge to rein perceptions of unfair price differentials with some form of price freeze or cap

The only novel policy ideas recently have centred on the increasing prominence of the Industrial Strategy and government support and focus on key areas of the economy.

Generally, it is clear that the trilema has already been very nearly toppled off its perch in this Parliament by a dualema in form if not in legislative substance, where security of supply and cost of policy take pre-eminence over decarbonisation.

Whether the voices proposing further movements in this direction within the current government win out or not in explicit policy commitments in the conservative election manifesto this time is not a given. The Conservative Party is a broad church and there are plenty of climate change activists in its ranks. However, there is a clear ideological thread that appears to link Brexiteer factions and climate change scepticism. In the current balance of party power that prevails that may tip the balance towards an agenda that really shakes up the cross party, low carbon energy policy consensus. This is a consensus that has existed at least since the turn of the millennium, and is emblematically embodied in the Climate Change Act 2008.

Arguably, with this election we are as close as we have ever been to a reversal in policy that could threaten the 2008 Act. It doesn’t mean that there will a manifesto commitment to its repeal but even considering the risk of it happening is is a profound state of affairs and signals just how far the energy policy landscape has changed, and how quickly.

Whether we see this radical shift remains to be seen. In any event  an immediate and real impact of the election is the uncertainty and delay this will bring to much needed policies. So, at the very least it will put back much needed changes and refinements to policy, even if the current shaky accommodation of the trilemma is maintained.

Unless we see a slew of rapid policy announcements, then Purdah will mean the effective shutting down of BEIS and Ofgem as only day to day operations are maintained. What were expected to be imminent key decisions and policies now become immediately uncertain, in substance and timing. These include:

The expected green paper on effective competition in the domestic energy retail market
The timing of the next Contracts for Difference (CfD) auction
A raft of comprehensive reforms to embedded benefits (CUSC modifications CMP264/265, a Targeted Charging Review, and potential a Significant Code Review
The Smart Energy call for evidence and the anticipated follow up consultations on a wide range of related areas
The promised new accounting controls for low-carbon scheduled for November, but can this timetable now be met?
Similarly, a decision on the Carbon Price Support for the period post 2021 was due “later this year” but again now this seems challenging, particularly given the complex inter-dependency with whether we continue to participate in the EU ETS scheme
2025 coal closure policy
The Emissions Reduction Plan that the BEIS press office even this morning maintained would be released “shortly”
The UK was already on the cusp of an energy infrastructure investment hiatus because of Brexit, the possibility of a further Scottish Independence referendum, as well as the poor management of policy changes in areas such as embedded benefit reform. The election announcement merely adds to this unhelpful cocktail , adding considerably to the many unanswered questions hanging over UK energy policy. It may even be a direct contributor to further uncertain political inflexion points. For example, if the SNP takes 55+ seats, again then the calls for a second Scottish independence referendum will only become more deafening.

So, at the very least the election on June 8 will herald challenges in making timely decisions on the critical policies we adopt in pursuit of the destination of a low carbon future. However, we believe, more fundamentally, it may also change that destination altogether.

Energy policy will be about cutting costs, not emissions, says Government chief

The Government’s energy policy will focus on cutting costs to business as a Whitehall official admits it has ‘neglected industry for too long’. Peter McCusker reports.

UK energy policy has been view through the prism of the ‘trilemma’ since Ed Miliband’s 2008 Climate Change Act, but that is changing under Theresa May’s Government.

Nigel Pargiter, acting head of energy supply chains at BEIS (Department of Business, Energy and Industrial Strategy), told a North East audience that the emphasis is now on cutting energy costs to homes and businesses.

In a question and answer session at the annual NOF Energy Conference at the Sage Gateshead, he conceded the Government had ‘neglected industry for a few decades’.

Responding to a question from John Bruijnooge, site director at Teesside industrial giant Sabic, he said Whitehall ‘has had to take a long hard look in the mirror’.

“We have neglected industry for too long and we now have to have a keen focus on costs.”

He went to say the previous energy policies, which focused on balancing a trilemma of reducing energy emissions, cutting costs and delivering energy security, ‘had been the result of tensions’ between two Government departments.

He said: “Under the Coalition, energy policy was split between two different departments, the Department for Business and DECC (Department of Energy and Climate Change), and there were tensions.

SABIC's Teesside site director John Bruijnooge
SABIC’s Teesside site director John Bruijnooge

“We got stuck on the trilemma. This became a sticking point, there was not one department to think holistically and this resulted in tension.

“Our view now is that decarbonisation has a cost to domestic users and businesses and our focus now is on ‘how much can industry bear before it is too much, and decides to go elsewhere?’”

In his earlier address to the conference he said: “The key challenge for us all is how do we get costs down and away from the subsidy regime. This is the biggest challenge we face and one that can be tackled by Government and industry working together.”

The North East has experienced the pain caused by measures to cut emissions with the introduction of the Carbon Price Floor in 2012 increasing costs at the Alcan aluminium plant by £30m, leading to its subsequent closure with the loss of over 500 jobs.

Mr Pargiter’s address echoed the Government’s Industrial Strategy Green Paper which talks about 10 key pillars for the UK economy; one of which is affordable energy and clean growth.

In this document the Government says it will continue to pursue a clean energy vision and is expected to confirm its latest Emissions Reductions Plan within the next few months.

Mr Pargiter said the Industrial Strategy will see Government ‘working with the devolved administrations and across all departments of Government’.

“The Industrial strategy is for the whole of the UK not just for London or specific sectors.

“We are trying to create networks and the right framework for business to grow and thrive, to deliver an economy that works for everyone, whilst also increasing productivity.”

He said the UK is good at research and development but often not so good at commercialisation of this knowledge. He said there will be an emphasis on deregulation and supporting exporters.

He went on to say there will be money available in a sector deal for energy and this will be focused on three things; energy costs, secondly to cut subsidies to zero and the third focus will be on innovation.

In working with business he said the Government ‘will favour an open door approach’ and businesses should ‘come forward and tell us what are the issues they face, that are hampering growth’.

Electricity pylons
Electricity pylons (Photo: David Cheskin/PA Wire)

“We want them to demonstrate a compelling case as to why they should benefit, one where it would be stupid for the Government not to get involved.”

Under the Coalition the industrial strategy for offshore wind said the Government would aim for a UK capital expenditure of 70%.

The average has been less than 30% and Mr Pargiter would not be drawn on the Government’s ambitions, although BEIS has previously told Journal Energy it is aiming for 50% lifetime UK content.

This a thorny issue for many who work in the sector, and has been cited as one of the reasons Newcastle offshore fabricators OGN went out of business, cancelling a £50m North East investment after losing out to Spanish-Government backed competitors for UK bill-payer subsidised contracts.

Mr Pargiter said: “We want to make sure UK companies are best placed and can operate on a level playing field.

“We are aiming up to open up the supply chain and more work needs to be done, there will be no percentage, but we are aiming to secure higher value contracts, not just ones for sandwiches and buses.”

This emphasis on cutting energy costs comes as further evidence of the UK direction of travel on energy has emerged in the last few weeks.

British Chancellor of the Exchequer Philip Hammond holds the Budget Box outside 11 Downing Street
British Chancellor of the Exchequer Philip Hammond holds the Budget Box outside 11 Downing Street(Photo: Getty Images Europe)

In the Budget Chancellor Philip Hammond said he will do all he can to prolong the life of the North Sea oil and gas industry.

Mr Hammond said he would look to resolve the tax issues slowing down asset transfers, with the current tax treatment of decommissioning making it harder for existing owners to sell mature assets.

False claims on low-carbon energy are damaging UK

The Committee on Climate Change was established by the 2008 Climate Change Act to act as the climate policy equivalent of the Bank of England’s monetary policy committee. Ministers and Parliament are required by law to rely on its advice. Arguably this role gives the committee more influence over Britain’s long-term prosperity than anyone else. A public body, funded by the taxpayer to the tune of £3.8m a year, discharging such a crucial role requires competence, honesty and objectivity.

The committee’s recent report on energy prices is deficient in all three, instead displaying similar ethical standards to Greenpeace or Friends of the Earth. Yes, low carbon electricity is more expensive than burning fossil fuels, the report conceded, but overall, low carbon policies were making people better off because energy efficiency policies meant that people were consuming less electricity.

plug
Low carbon policies are making people better off because energy efficiency policies mean they consume less electricity

UK nuclear decommissioning debacle costs government nearly £100m

Business secretary orders inquiry into flawed tendering process for dismantling old reactors at 12 sites as US firms get paid for out of court settlement

 

The government has been forced to pay nearly £100m in a settlement with two US companies for mishandling the way it awarded a £6.1bn nuclear decommissioning contract.

Ministers have ordered an inquiry headed by the former boss of National Grid to find out why the procurement process was so flawed. Labour said the payout showed “dramatic levels of incompetence”.

The government body tasked with decommissioning old reactors will also terminate the contract it awarded for cleaning up a dozen of the UK’s old nuclear sites nine years early.

In a written statement, Greg Clark, business secretary, said: “This was a defective procurement, with significant financial consequences, and I am determined that the reasons for it should be exposed and understood; that those responsible should properly be held to account; and that it should never happen again.”

The debacle dates back to a 2012-2014 tender process by the Nuclear Decommissioning Authority (NDA) for dismantling 12 sites. They include old reactors at Sizewell in Suffolk, Dungeness in Kent and Hinkley Point in Somerset, where the UK is building the first new nuclear power station in two decades.

A 14-year deal was awarded to international consortium Cavendish Fluor Partnership in 2014, but the bidders who lost out immediately launched a legal challenge.

On Monday, the Department for Business, Energy and Industrial Strategy said it had settled with US-headquartered engineering companies Energy Solutions and Bechtel, for £85m and £12.5m respectively. Had their litigation cases gone to trial, Clark said the “very substantial costs” had the potential to rise much further.

Energy Solutions had claimed a scoring mechanism had changed at a late stage in the tender process and that there was inconsistency in the way bids were evaluated, among other failings.

Former National Grid chief executive Steve Holliday has been appointed to lead an independent inquiry into what went wrong. The inquiry will look at how the mistakes were made and by who, how the litigation was handled, and the relationship between the NDA and the government departments.

Holliday will report to Clark, with an interim report due to published in October.

The government now has the daunting task of starting a new tendering process for the 12 sites, as the deal with Cavendish Fluor Partnership will end early, in September 2019 instead of 2028. Clark said he wanted to stress the deal was “no reflection” on the performance of the consortium, which will continue clean-up work over the next two years.

The contract is being terminated early because the NDA underestimated the scale of the decommissioning required to clean up the Magnox sites, which form part of the UK’s first generation of nuclear power stations.

The share price of Babcock International Group, which has a stake in the Cavendish Fluor Partnership, has fallen by more than 3% since the government announcement.

Rebecca Long-Bailey, shadow energy secretary, said: “By cancelling just two years into a 14-year contact the government has shown dramatic levels of incompetence in the procurement process of this deal.

“British tax payers who stand to lose nearly £100m should be asking themselves not just whether they are willing to put up such ineptitude but also whether the government actually has a well thought out and long term nuclear decommissioning strategy.”

Unions said they were concerned at any potential job losses as a result of the contract ending early.

Mike Clancy, general secretary of Prospect, said: “This is an extraordinary situation given the scale and importance of the Magnox contract to the UK nuclear industry.

“The public, and our members, will want reassurance that the termination process and uncertainty over the future of decommissioning will not lead to standards deteriorating or the loss of UK expertise.”

The Unite union said the financial mess involved in awarding the contract showed the clean-up project should be taken into public ownership.

Stephen Thomas, emeritus professor of energy policy at the University of Greenwich, branded the NDA’s handling of the contract “an immense screw-up.” He added that there would be a further hit to the taxpayer because of the cost of a new tender.

The NDA has an annual budget of £3.1bn, two thirds of which is spent on Sellafield in Cumbria, which stores most of Britain’s nuclear waste.