Utility news
On this page you will find industry news about electricity, gas, water, fixed and mobile telecoms, and other stories. Our news is updated once per month. We cover items such as developing technologies, price changes in the utility markets, takeovers and company collapses, changes in tariffs, the results of investigations by the regulators and market trends.
Please take time also to visit our Business Cost Consultants news page, where we will keep you up to date with developments in Business Cost Consultants, and coverage we have had in news and trade press.
If you would like to be kept up-to-date with utility news, you can join our list of free monthly newsletter subscribers; just go to the Newsletter sign-up page. You can unsubscribe at any time.
- See the Newsletter sign-up page.
Industry news
Government looks again at ways of providing water choice
Friday, February 29, 2008
The Government is to look into the possibility of allowing households to choose from a selection of water suppliers under proposals to be outlined today.
Unlike in the gas and electricity markets, at the moment consumers must use their regional supplier, such as Severn Trent or Thames Water, which supply all households that fall within their areas of operation.
The review will be unveiled tomorrow by Hilary Benn, the Environment Secretary, and has been commissioned by the Treasury and the Department for Environment, Food and Rural Affairs. It will be headed by Martin Cave, a professor at Warwick Business School.
It is not the first time the Government has examined whether it would be feasible to open up household water supplies to competition but after an inquiry in 2002 it was considered to be impractical.
A Government official said yesterday: “It would be extremely difficult. Say, for example, I live in Ealing, I couldn’t very well get by water from Yorkshire. If you live on a border it is perhaps a possibility.”
She added that the review would also look into the practicality of allowing businesses to choose their water supplier. “It is much more relevant to businesses that use a large water supply than households,” she said.
However, Ofwat, the water regulator, has asked the Government to take a second look because of changing circumstances.
In 2003, legislation was introduced seeking to open the market up by allowing customers using more than 50 million litres a year to choose to switch suppliers.
Seven companies, including Aqua-vitae, have been granted licences to supply water but no customers have yet switched.
However, Ofwat has suggested that the situation could change if the market was not restricted by the larger companies and is urging the Government to reduce the threshold for customers from 50 million litres of water a year to 5 million litres.
The review will be carried out at the same time as Ofwat continues to consult on two key proposals to increase competition in the water industry.
From Times Online
Permanent link for this article
National Grid fined £42m for fixing gas meter market
Monday, February 25, 2008
National Grid, the UK gas and power infrastructure operator, has been fined a record £41.6 million by UK energy market watchdog Ofgem for restricting competition in the market for domestic gas meters.
Ofgem said that National Grid had abused its dominant position in the market, restricted the number of meters made by competitiors from being installed. Ofgem say this harmed consumers.
"Ofgem has imposed a substantial fine on National Grid for a serious breach of competition law," Sir John Mogg, the chairman of the watchdog, said in a statement.
"The abuse has prevented suppliers from contracting with other companies for cheaper metering deals and could discourage suppliers from installing smart meters." National Grid has been accused of restricting the process through which customers can replace their existing gas meters with more efficient ones from rival companies.
Agreements that National Grid had signed with five of the six big UK energy companies to supply and maintain gas meters featured penalties if they replaced more than a limited number of meters, thereby slowing the process.
National Grid responded by saying that it was "extremely disappointed" by Ofgem's decision and intended to appeal.
"These contracts were negotiated over a two-year period, were voluntarily entered into by gas suppliers and delivered immediate and substantial reductions in charges for meter services," the company said.
It claimed that the agreements had saved customers about £120 million over four years.
Courtesy of Times Online
Permanent link for this article
National Grid fined £42m for fixing gas meter market
Monday, February 25, 2008
National Grid, the UK gas and power infrastructure operator, has been fined a record £41.6 million by UK energy market watchdog Ofgem for restricting competition in the market for domestic gas meters.
Ofgem said that National Grid had abused its dominant position in the market, restricted the number of meters made by competitiors from being installed. Ofgem say this harmed consumers.
"Ofgem has imposed a substantial fine on National Grid for a serious breach of competition law," Sir John Mogg, the chairman of the watchdog, said in a statement.
"The abuse has prevented suppliers from contracting with other companies for cheaper metering deals and could discourage suppliers from installing smart meters."
National Grid has been accused of restricting the process through which customers can replace their existing gas meters with more efficient ones from rival companies.
Agreements that National Grid had signed with five of the six big UK energy companies to supply and maintain gas meters featured penalties if they replaced more than a limited number of meters, thereby slowing the process.
National Grid responded by saying that it was "extremely disappointed" by Ofgem's decision and intended to appeal.
"These contracts were negotiated over a two-year period, were voluntarily entered into by gas suppliers and delivered immediate and substantial reductions in charges for meter services," the company said.
It claimed that the agreements had saved customers about £120 million over four years.
From Times Online
Permanent link for this article
Inflated energy bills fail to put wind in renewable market's sails
Monday, February 04, 2008
The subsidy system supporting wind farms in the UK is one of the most expensive in Europe, according to research by the European Commission.
Only Italy's system, which is of a similar style to the UK's "renewables obligation" or RO, gives renewable electricity companies a greater expected profit.
The subsidies come not from the taxpayer but the electricity consumer, adding £1bn a year to electricity bills by 2010, rising to £3bn by 2020. But although the subsidies are intended to increase the amount of electricity produced from renewable sources - of which wind is one of the cheapest and most mature - fewer new wind farms are being built, owing to planning restrictions.
Last year about 427 megawatts of generating capacity was erected, compared with 650MW constructed in 2006, according to the British Wind Energy Association.
So while the amount paid in subsidy by consumers increases steadily, the amount of electricity produced from wind, and other renewables, is rising only slowly. Existing wind farms are therefore making bigger profits than ever, from a combination of higher subsidies and a higher electricity price.
Indeed, according to calculations made by Ofgem, the electricity regulator, the high electricity price of more than £50 per megawatt hour means wind farms in favourable locations with strong winds could be profitable without the subsidy.
Ofgem says that some form of financial support is still needed for the wind sector, because the price of electricity fluctuates, but says the current system is too expensive.
Few people realise that about £10 of their household electricity bill each year goes to support the renewables sector. Peter Atherton, head utilities analyst at Citi Investment Research, said: "The consumer pays. It's a regressive tax on the poor."
According to an analysis by Ofgem last year, the cost per tonne of carbon dioxide saved under the renewables obligation was £184 to £481 - far more than other policy measures, such as the European Union's emissions trading scheme, at £12 to £70 a tonne, the climate change levy at £18 to £40 a tonne, and the energy efficiency commitment, which costs less than £60 a tonne.
The economics of the wind industry are opaque, however, as most wind farms are either owned by electricity utilities which do not break out their revenues from wind in the UK, by renewables specialists with a variety of investments outside wind, or by private companies that do not disclose the breakdown of their profits. According to Financial Times estimates a small, well-sited wind farm with 10 turbines, each of 2MW capacity, can expect to reap revenues of between £3.5m and £5m a year, on an outlay of about £20m with ongoing maintenance costs of up to £400,000 a year.
But some wind companies say the sums they make are much smaller. RWE Npower told the FT its estimate was about £75 to £85 per megawatt hour when the price of electricity and income from the RO were combined, compared with about £100 in Ofgem's calculations.
Wind farm owners argue that their profits are not excessive, given the amount of risk they have to take on, particularly in regard to the planning process. A protracted planning application can cost a company more than £1m for even a medium-sized wind farm.
Ian Marchant, chief executive of utility Scottish and Southern Energy, said wind farms had started to compete with coal-fired and gas-fired power stations in economic terms as the electricity price and fossil fuel costs had gone up. "But wind energy still needs a special support mechanism. It would not get built without it."
Willie Heller of Falck said: "The UK is the riskiest country to do wind [because of difficulties gaining planning permission for turbines]."
Wind operators also point out that their costs are rising: the price of turbines has increased by about 30 per cent in the past few years, as there is not enough manufacturing capacity to fulfil demand for them.
Mr Marchant at SSE said: "Any first generation wind farm that got in before the increase in turbine costs has proved to be an excellent investment," adding that these wind farms have been reaping "double digit" returns on investment.
The renewables obligation will be reformed in the government's planned energy bill, with higher subsidies available to technologies such as offshore wind farms and wave energy, which have not benefited much so far. But the way cash is channelled to onshore wind farms will not change.
The EU targets agreed by the government would require an eight-fold increase in renewable electricity output by 2020, and a large proportion of this is expected to come from the wind sector.
Permanent link for this article
