Utility news
On this page you will find industry news about electricity, renewable energy, 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.
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Industry news
Vodafone ready to call T-Mobile to form UK’s No 1 telecoms group
Tuesday, June 30, 2009
Vodafone is considering buying T-Mobile UK in a deal that would create Britain’s biggest mobile phone operator.
T-Mobile is a comparatively small player in the fiercely competitive and low-margin British market. Valued between £2.5 billion and £3.4 billion, it commands a market share of only 15 per cent compared with Vodafone’s 25 per cent. Deutsche Telekom is thought to want out of the British market, which, with five big companies, is more congested than most in Europe.
T-Mobile and Vodafone declined to comment last night. However, one source close to the situation said that Vodafone was examining its options.
A joint venture or an outright acquisition are among the options on the table, although regulators would have to approve any deal. As well as being bound by normal competition rules, the industry is regulated by Ofcom, which is investigating the charges that operators levy customers for connecting to other networks.
Some analysts believe that consolidation is likely, with competition watchdogs accepting precedents from continental Europe, where there are fewer dominant players in the market. Vodafone has stated in the past that it is on the lookout for opportunities for consolidation. It merged its business in Australia with Hutchison Whampoa in February.
Suggestions of a takeover of T-Mobile are among the latests signs that Vittorio Colao, who became chief executive last July, plans a fundamental reshaping of the group. Last week it emerged that the group was to move its from its headquarters in Newbury, Berkshire, to modern offices in Paddington, Central London.
Vodafone had been based in Newbury for more than 20 years, since its days as Racal Electronics. The company said that the move was not financially motivated.
Mr Colao said that he was an “active supporter” of consolidation, with T-Mobile, the No 4 in Britain, and 3, the fifth-largest operator, often being mooted as the likely targets. Mr Colao said last month: “I don’t know if there is a three-way [merger], I don’t know if there is a two-way, I don’t know if there is a way at all — but it is clear to me that there are a few markets around the world where consolidation would make sense and we are one of the leading players, so we have a duty to look at everything. If things make sense and improves the conditions in the market, we will try our best.”
Vodafone announced a fresh wave of costcutting last month after nearly £6 billion of writedowns halved its full-year profits to £3.08 billion. It is the world’s largest operator, by revenue. It wrote down the value of its Spanish business by £3.4 billion and took a £500 million hit on its Turkish division as the global downturn and increasingly tough competition took their toll.
This story was featured on The Times Website.
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Regulator wants water charge cap
Tuesday, June 30, 2009
Household and business water charge increases should be kept below the rate of inflation over the next four years, according to the industry regulator.
Sir Ian Byatt, chairman of the Water Industry Commission for Scotland, wants annual price rises to be kept 1.5% below the rate of inflation.
The regulator said efficiencies would be required, but there should also be improved customer service.
But it should allow £500m annually to be spent upgrading pipes and sewerage.
The cap on price rises will apply to households, and should apply to most businesses, as well as the public sector and charities, though industrial effluent producers are to bear a larger share of the cost of handling their waste.
Priorities for Scottish Water include the tackling of problems with Glasgow's drainage, cuts in leakage, and reducing the risk of cryptosporidium infection through improved water treatment.
But there was a warning from the regulator that tight public spending at Holyrood could choke off Scottish Water's capital spending allowance, and a call for the publicly-owned company to be given ways to access private funding.
Sir Ian Byatt suggested this could be through the Scottish Futures Trust, set up by the Scottish Government to find new ways of finding access to finance, or through giving Scottish Water the same funding regime as Network Rail.
If there is a lack of capital finance available, the warning goes on that customer bills would have to rise, or there would have to be a cut in the amount of capital investment.
With Scottish Water newly facing competition for its non-household customer base, but with little sign of competitors entering the market, the regulator's draft proposals are also aimed at boosting the opportunity for new retail suppliers to come forward.
'Good deal'
Alan Sutherland, chief executive of the Commission, said: "This Draft Determination represents a good deal for customers, our environment and our economy.
"Household customers will benefit from prices that will increase at less than the rate of inflation and from better service.
"Businesses and public sector organisations should expect more tailored and improved services from their chosen retailer and lower prices.
"Our environment should benefit from a substantial yet flexible capital expenditure programme which allows issues to be addressed in both a timely and effective way."
Scottish Water and others are able to respond to the draft proposals by 23 September, and then a final ruling on the charging regime will be announced on 26 November.
This story was featured on the BCC News Website.
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Ofgem Tells Suppliers To Improve Complaint Handling
Tuesday, June 30, 2009
Most consumers are unhappy with how suppliers deal with their complaints
Energy regulator Ofgem has urged suppliers to up their game in complaint handling as consumer research found less than one in four customers were satisfied with the way gripes were dealt with.
While an independent audit commissioned by Ofgem found that suppliers had made the necessary systems investments and updated their processes in preparation for new complaint handling standards introduced last year, customers remained dissatisfied.
Research commissioned by the regulator found that consumers were particularly unhappy with the number of times they had to contact the supplier, suppliers who promised to call back but didn’t, the attitude of some staff and the fact that suppliers often viewed the problem as resolved when in the customer’s eyes it was not.
While there were low levels of satisfaction across all suppliers some performed better than others. Out of the big six, SSE and E.ON rated joint highest for satisfaction (29%) and npower was rated lowest (16%).
In a letter to the Chief Executives of the big six energy companies today, Ofgem Chief Executive, Alistair Buchanan, said he was disappointed with the low level of customer satisfaction in complaint handling and that he expects to see improvements when the regulator looks at the issue again next year. He advised:
"It is in suppliers’ best interests to ensure that the service they provide is of a high standard. This is clearly an opportunity for them to raise the bar to retain existing customers and attract new ones.
With the systems and processes in place, the challenge now for companies was to really listen to what their customers were saying and look at how they could address their concerns."
In introducing the new standards Ofgem was also looking for suppliers to publish information on their complaint volumes to help customers in choosing supplier. An initial review of this information raised concerns as to whether EDF Energy was properly recording all complaints. Ofgem is investigating EDF Energy’s compliance with the new regulations in this area.
This was featured on The OFGEM Website.
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Russian move raises supply crunch fears
Wednesday, June 17, 2009
Alexei Miller, Gazprom's chief executive, warned in a speech in Italy last week of a looming "supply crunch" in the oil market after 2012, caused by under-investment today, which could send oil and gas prices soaring.
A few days later, he drove that warning home in the most vivid way possible, with Gazprom's investment cuts and production delays raising the spectre of a gas supply crunch in Europe.
The decision to defer the flow of gas from Gazprom's first development of the huge reserves in the Yamal peninsula, in northern Russia, makes perfect sense in the short term.
All the talk in the industry is of a global "gas glut", fostered by a surge in supplies of liquefied natural gas, particularly from the mega-projects in Qatar now coming on stream.
"Barely a year ago everyone was saying Gazprom would not be able to keep up with demand," says Jonathan Stern of the Oxford Institute for Energy Studies. "The speed of the turnround has been extraordinary."
The global recession has hammered Europe's gas consumption, particularly for industrial users. The car industry, for example, uses gas-fired heaters to dry paint, and many assembly lines have fallen silent.
Cedigaz, the gas industry association, has estimated that industrial demand in developed economies, including the European Union, the US and Japan, will be 17 per cent lower this year than last year.
Residential consumption is more stable, but the EU's overall demand could fall 5 per cent this year, even after an unusually cold January.
Gazprom, which is the biggest gas importer into the EU, has been forced to cope with that downturn at the same time as Russian demand has been plunging.
Prof Stern estimates that EU demand will be 20bn cubic metres lower than last year, Russian demand 40bn cu m lower and demand from Ukraine and other former Soviet states also 20bn cu m lower.
Gazprom has responded by cutting its own production and forcing independent Russian gas producers to cut theirs. It has also told Turkmenistan, one of its main central Asian suppliers, to cut its export price. An explosion in April cut the gas pipeline from Turkmenistan to Russia, and it has not yet reopened. The causes are disputed.
The rate at which gas demand picks up will depend on the pace of economic recovery.
Tony Hayward, chief executive of BP, said last week that although demand had steadied after dramatic falls earlier in the year, there were as yet no signs that it was rising again.
So Gazprom's forecast that even in 2012 its production is likely to remain lower than last year is a plausible assumption.
The alarming prospect for Russia is that western European demand will never recover. If the EU could meet its objective of raising energy efficiency by 20 per cent by 2020, then its gas consumption could fall through the decade. Cambridge Energy Research Associates, a consultancy, argued recently that even going halfway to the EU target could cut gas demand back to early 1990s levels by 2030.
However, other experts are sceptical those savings can be achieved, or that other fuels can substitute for gas in the next decade.
Colette Lewiner of Capgemini, the consultancy, argues that European gas demand is set to rise until at least 2020.
"I don't think renewables will be able to do enough," she says. "If you take all the other energy sources, you are still left with a rising need for gas."
European production, meanwhile, is in decline. The International Energy Agency estimates western Europe's gas production will fall by 30 per cent over the next two decades.
The search is on for new sources of gas to bring to Europe. The EU has high hopes for Azerbaijan and Turkmenistan, and recently there has been growing optimism about gas from northern Iraq. But the reality is that the EU cannot do without Russia, and sooner or later that gas from Yamal will be needed.
This story was featured on The Financial Times Website.
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Carphone and Vodafone reconnect
Thursday, June 11, 2009
VODAFONE is set to end a three-year dispute with Carphone Warehouse by resurrecting a sales agreement with the mobile-phone store chain.
Talks between Charles Dunstone, the Carphone boss, and Vodafone’s senior management are believed to be at an advanced stage, with an announcement expected imminently.
The deal would lead to Vodafone mobile contracts being sold in Carphone’s 800 UK stores for the first time since 2006.
Vodafone ended a previous deal with Carphone and switched to an exclusive agreement with rival Phones4U, which committed to signing up 30,000 Vodafone customers a month.
Dunstone was shocked by the decision at the time, and suggested that Vodafone had walked away from the negotiating table too quickly.
Carphone’s shares fell 14% on the day the contract loss was announced, with analysts estimating the chain could lose about £20m of annual earnings. The independent research house Arete predicted that the company’s shares would halve in value.
Dunstone has remained in on-off talks with Vodafone about resurrecting the deal. Carphone never lost the contract to sell Vodafone’s prepaid mobile phones.
Carphone’s business model has radically changed since the previous deal was agreed. Dunstone has spun off his retail business into a joint venture with the American electrical retailer Best Buy. The new chain will sell consumer electronics as well as mobile phones. As part of the deal, Carphone has a profit-sharing agreement with Best Buy’s American mobile business.
Dunstone has also created a large broadband internet business. Just days before losing the Vodafone contract, Carphone paid £370m to acquire AOL UK, the internet service provider. That business, rebranded Talk Talk, has now expanded into Britain’s second-biggest broadband provider, thanks in part to its £236m acquisition last month of Tiscali UK.
Last week, Dunstone confirmed plans to demerge the two businesses by July 2010. They will be named Best Buy Europe and Talk Talk Group.
He also announced that the group had raised pretax profits to £133m in the year to March 2008, up from only £4m last year.
This story waas featured on The Times Website.
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Landlords face liability for tenants’ unpaid water bills under government proposal
Wednesday, June 10, 2009
Residential landlords could be made liable for unpaid water bills left by departing tenants under a government review of water charges.
Landlords described the proposal, which has been submitted to the forthcoming Walker review on the social, economic and environmental aspects of water charging, as an “alarming prospect”. They said that it would push up rents.
The proposal comes amid plunging profits and rising bad debts at quoted water companies. Yesterday Northumbrian Water reported a 10.3 per cent fall in pre-tax profits to £152.7 million for the year to March 31. This was slightly ahead of analysts’ forecasts of £150.7 million.
The group, which provides water and sewage collection services in the North East, Essex and Suffolk, proposed a final dividend of 8.50p a share, compared with 8.07p last time.
John Cuthbert, its managing director, said that the company had increased its provision for bad debt from domestic users by £2 million to £30 million. Demand for water and sewage services fell by 1 per cent last year. He said that water companies were vulnerable to bad debts among consumers because they were not permitted to disconnect their supply for non-payment. This meant that their bills tended to be the last ones paid.
Recovering outstanding debt from tenants was particularly difficult. “Quite often by the time we have found out who the tenants are, they have gone,” Mr Cuthbert said. “We are talking to the Government about what help they can give us here. One proposal would be to make the landlord liable.”
Research for TDX Group, a provider of debt liquidation solutions for creditors, suggests that up to 5 per cent of all householders (representing 1.1 million homes) could default on their water bills this year, which would add a further £350 million of debt to water companies’ balance sheets by the end of 2009.
John Telford, of TDX, said that last year water companies’ bad debt had grown by 11 per cent. “As economic conditions worsen, the situation for water companies is going to get a lot worse as competition among creditors to recover outstanding debts will intensify,” he added.
The proposals to make landlords liable for water bills at their properties have been drawn up by Ofwat. They would require property owners or managing agents to identify who is the “liable person” for water charges at any property. A spokesman said: “The occupier will always be the first person liable, but, as things stand, there is no incentive for the landlord to tell the water company who the occupier is and without this information the water company cannot bill anyone.”
The new rules, which would require primary legislation, would give landlords an incentive to provide details of the tenant or face paying an outstanding bill themselves.
Ofwat has submitted the proposals to Anna Walker, chief executive of the Healthcare Commission, who was asked by the Government last summer to conduct a review of charging and metering for water and sewerage services.
A draft report is expected to be published in the next few weeks with a final report later in the year. A spokeswoman for the Department for the Environment, Food and Rural Affairs confirmed that the Ofwat proposal was “one option being considered by the Walker review”.
Thames Water, which serves 8.5 million drinking water customers in London and the Thames Valley, welcomed the proposals and said that bad debt and write-off costs increase the typical household bill by £11 a year. “Landlords take damages deposits up front from their tenants and so they are in a better position to recoup outstanding debts if needed,” a spokesman said.
Richard Jones, secretary of the Residential Landlords’ Association, said that rents would have to rise to cover landlords’ extra exposure. “We are already concerned about how money can get held up in the new tenancy deposit regime. If you end up with a dispute resolution service, excessive procedural requirements are being put on landlords. Cases are being thrown out on technicalities,” he said.
This story was featured on The Times Website.
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Iberdrola to lead field in race for Sellafield site
Tuesday, June 09, 2009
Sellafield, Europe's most heavily contaminated industrial site, went under the hammer yesterday.
Iberdrola, the Spanish energy giant that owns ScottishPower, is expected to be among the bidders for a 250-hectare parcel of land adjoining the main site in West Cumbria where Britain mastered the technology to build the atomic bomb in the 1950s and later built the world's first commercial nuclear power plant.
John Clarke, the Nuclear Decommissioning Authority's commercial director, said that the plot - which is expected to raise at least £100 million for the Treasury - had “outstanding potential” as a site for development of a new reactor, likely to cost at least £4 billion to build.
Some experts have criticised Sellafield's suitability for a new reactor because it is a sprawling landscape of chimneys, storage ponds filled with nuclear waste and radioactive buildings awaiting demolition. “It is a very complex site,” one industry insider said. “It is not necessarily the simplest place to build a new power station.”
About 10,000 people work at Sellafield, mostly on decommissioning contaminated buildings, many of which date back to the 1950s.
The sale of Sellafield, and farmland stretching around the northern perimeter of the main site, follows the auction in April of three other government-owned sites for new nuclear plants to European utilities for a total of £387 million. A consortium comprising RWE and E.ON, of Germany, bought sites at Wylfa, on Anglesey, and Oldbury, in Gloucestershire, while EDF, of France, bought another site at Bradwell in Essex.
However, it is unclear whether there will be sufficient interest in Sellafield to ensure a formal auction. The site could be sold directly to Iberdrola if it is the only party to express an interest.The NDA expects to conclude the sale this year.
EDF is planning to build four reactors on two sites owned by British Energy, the UK nuclear generator that it bought last year for £12.1 billion.
Yesterday, shareholders in Centrica, the owner of British Gas, voted overwhelmingly in favour of the company acquiring a 20 per cent stake in British Energy from EDF.
British Energy's eight operational nuclear plants supply about 17 per cent of the country's electricity.
However, all but one of those are due to be retired from service over the next 15 years.
This story was featured on The Times Website.
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Smart meters essential to energy supply
Tuesday, June 09, 2009
The implementation of smart meters will be a huge challenge. There will need to be standards to support different types of meter and a national infrastructure to ensure that the data from the meters is available in the right place at the right time. Someone will have to finance this and a future generation will have to pay for it.
Despite these risks, the scale of the challenges we face means that smart metering has to be a vital part of our national energy infrastructure. How do we make it successful? First, we must get the level of competition correct. The UK did a brilliant job of creating the world's first truly liberalised domestic energy market. However, competition was driven down to very low levels, including segregation of the metering business. This incurred a cost wholly disproportionate to the benefit. We must not make the same mistake again.
Second, we must apply the lessons from elsewhere. Work in Australia and the United States has identified that significant benefits accrue to distributors, the people who own the pipes and wires; in the US, savings of 30 per cent have been achieved. Our benefits are primarily identified at a consumer, supplier and metering level.
Smart metering is a prerequisite of a smart grid. Our energy supply has been driven top down by large power stations. In the future, it must support bottom-up demand management, local generation and consumers selling energy back to the grid. This 21st-century infrastructure will be achieved only with a solid smart meter base.
This story was featured on The Times Website.
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Gas pipelines
Monday, June 01, 2009
The politically charged race to build a new natural gas pipeline into southern Europe is hotting up.
An agreement this month by Gazprom and Italy’s Eni to double the capacity of their South Stream project to pipe Russian gas under the Black Sea would enable it to carry a 10th of annual European Union demand. Gazprom simultaneously signed deals with Bulgarian, Greek and Serbian partners to build onshore branches to central Europe. Two days later, the rival EU-backed Nabucco project, aimed at bringing gas from the Caspian Sea and Middle East, hit back. Austria’s OMV and Hungary’s MOL, two Nabucco partners, took stakes in two gas fields in Iraq’s semi-autonomous Kurdistan.
These might yet provide enough gas to get Nabucco – which has struggled to sign up suppliers and customers – off the ground. Years-old published reserves figures suggest that the Kurdish fields are of modest size. But the developers insist latest surveys indicate they could fill half Nabucco’s annual capacity. They say Iraqi oil ministry warnings that Kurdistan can export only with Baghdad’s consent are legally unfounded. If Nabucco can add the Kurdish gas to Caspian gas from Azerbaijan it has already contracted, it might start raising its $10bn financing. But getting there will be tortuous.
South Stream, by contrast, edges towards reality. It already has supplies and customers, and Gazprom has methodically stitched together agreements with transit countries. It is cheekily suggesting Brussels should designate South Stream, just as Nabucco, a “priority project”. The EU might have to consider it; after all, several member states – including those hardest hit by Russia’s New Year gas spat with Ukraine – are backing it. Neither project, however, will be completed for years. Russia, meanwhile, is hinting at another winter showdown if Kiev struggles to pay its gas bill. Alongside its Nabucco efforts, the EU needs to invest a lot more in storage capacity and connections between gas networks to avoid more January shivers.
This story was featured on The Financial Times Website.
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