Guardian: “Britain has been warned that it faces an energy investment freeze and a heightened risk of blackouts after the industry watchdog called for the deepest ever investigation into the big six power suppliers.”
“Sam Laidlaw, chief executive of British Gas parent group Centrica, said the building of new power plants would be set back by the climate of uncertainty, increasing the threat of power shortages.
Centrica was backed by investors as one City firm argued that the UK now “tops the political risk table”. A second City firm, Liberum Capital, argued: “It is likely in our view that the hiatus in power generation investment we have seen in recent years will continue and probably deepen.”
But the warnings were dismissed by energy regulator Ofgem which said it wanted to “clear the air” after confirming evidence of soaring corporate profits and plunging consumer confidence.
The inquiry to be undertaken by the newly created Competition and Markets Authority (CMA) could lead to the break-up of the big six power companies such as British Gas and RWE npower by separating their supply arms, which sell power to households, and the generation units that own power stations.
The review could take up to two years to complete but Ofgem warned of much higher fines amounting to “tens of millions of pounds” against power companies if they break rules in the meantime.
….Ofgem said it found that 43% of customers did not trust energy companies to be clear and honest about prices, and that suppliers’ retail profits – from selling energy to households and businesses – had risen to £1.1bn in 2012 from £233m in 2009. Suppliers consistently set higher prices for existing consumers compared with those who have switched.
….When questioned on the BBC Radio 4’s Today programme about whether it would mean power outages, he said: “There is an increasing risk. A lot can be done in terms of demand management, but actually building a new gas power station does take four years. So that’s the kind of time pressure we are up against, by adding another two years that makes it six years.”
The Labour Party dismissed this argument as “special pleading” by British Gas while Davey said: “He [Laidlaw] is absolutely, totally wrong and I can prove it. We have 14 contracts for power generation [in the pipeline] over the next 15 years … What we are seeing in Britain is a big investment in energy. It is true that companies like Centrica are not investing as much as we might like them to but we are seeing independent energy generation firms like Siemens coming in in their place.”
Terry Macalister in the Guardian: “The energy watchdog’s call for a full investigation into the industry is a victory for consumer power over the big six suppliers, Ofgem itself and, to a lesser extent, politicians. It will cause some uncertainty for investors looking at much-needed new power plants over the next two years but it is ultimately better for them than the current situation, which is inherently unstable and unsustainable.”
“Ofgem is under new leadership and can discard the baggage of the past 10 years, when it was captured by the big six and failed to act robustly despite a bundle of evidence that the market was working for companies rather than consumers. Successive governments have allowed this situation to continue while failing to come up with a workable framework for modernising the creaking energy infrastructure and introducing lower-carbon power without placing an impossible burden on the consumer.
Ofgem has acted after some of the companies themselves – such asE.ON – called for a deeper inquiry by the Competition and Markets Authority (CMA). Surely now the corporate game is up for increasing profits while doing little to improve internal efficiency or provide appropriate levels of customer service.
Consumer and campaign groups such as Which?, Age UK and Fuel Poverty Action will take credit for repeatedly drawing attention to the plight of those trying to pay the bills, who have lost all trust in power providers. Their campaigning has pushed politicians to press the regulator into action. But to describe the problems in the power sector as a “political and media” confection, as some industry executives like to do, is self-defeating.
….Most of the big six welcomed the Ofgem call for an inquiry on the grounds it would “clear the air” and “take the politics and media out of the situation”, as though the storm was not of their making.
….Centrica and other power companies have been mothballing gas-fired power plants in Britain. However, hard-headed independent investors, such as Macquairie, Australia’s largest investment bank, and oil trader Vitol have been buying gas plants in anticipation of better trading ahead.
….Britain invests around £35bn on defence every year but new figures out last night from the National Energy Action fuel poverty charity showed public spending on energy efficiency measures in England through the Green Deal Community Fund was £80m. That latter figure equates to £3.50 per electricity user.”
Future Today
