A number of industry chief executives have written to the government urging the Energy Prices Bill to be amended due to fears some of its proposals will give ministers too much power over regulation.
The bill, announced earlier this month, includes a cap on the revenues of low-carbon generators to clawback some of their windfall gains from high power prices and help pay for the government’s support schemes for billpayers.
In a letter to business and energy secretary Jacob Rees-Mogg, the bosses of Energy UK, Centrica, EDF, Eon, Octopus, Ovo, Scottish Power and SSE said it is “clearly necessary to enable much-needed support with bills for households and businesses this winter.”
Yet the energy chiefs said they were “alarmed” to see clauses in the bill that “unexpectedly propose extensive new powers for ministers in relation to the regulation of the sector”.
“The companies we lead are vital to the UK economy. We therefore seek urgent clarification and reconsideration of the inclusion of these broad measures,” the letter said, adding: “The speed at which the bill is being introduced prevents proper scrutiny of changes with long-standing and profound consequences for the energy sector.”
It said the proposals regarding the revenue cap are “significant enough in themselves to put investment in the UK’s low-carbon industry in jeopardy at a time when it is most needed to ensure our long-term energy security”.
Furthermore, the letter said the clauses in the bill which give the secretary of state powers to intervene in Ofgem’s price cap on default tariffs are “equally concerning”.
“This must be an independently made economic decision, based on the efficient costs accrued by energy suppliers,” it stated.
A further proposal to grant the secretary of state powers to be able to modify licences and issue directions in times of crisis “has the potential to impact just about everything energy companies do on an indefinite basis”.
“As it stands the bill would offer no protection from any resulting financial implications for companies from following such directions, and little in the way of checks and balances typically seen in regulated markets,” the letter concluded.
“It is essential to avoid creating an environment that puts investment in the UK’s energy infrastructure – and the delivery of a secure, affordable, low carbon energy system- in jeopardy. We therefore urge the government to take on board these concerns and act accordingly.
“In the meantime, we want to underline our continuing commitment to work with Ofgem and the government to get us all through the next, difficult six months and beyond. That can only be achieved with an independent and fair legislative and regulatory framework.”
Writing earlier this week, letter co-signatory and SSE chief executive Alistair Phillips-Davies expressed his concerns about the government’s plans and said its decision to intervene so “strong-handedly” to cap revenues carries “significant risk” for energy security, growth and jobs.
“A blanket price cap could encourage flexible technologies to be exhausted in normal conditions, rather than held back for critical supply in times of need,” he warned.
As such he called on the government to “explicitly rule out revenue caps” for flexible renewable technologies.
He further cautioned about the impact the plans could have on investment and urged the UK revenue cap to closely align with the €180/MWh cap set by the European Union, which he said strikes a balance between preventing excessive profits and continuing to incentivise investment in the renewable technologies needed to wean the continent off Russian gas.
He added: “The UK’s commitment to building a future energy system anchored in renewables must remain unquestionable, providing long-term energy security for this country for generations to come.
“A country that can better power itself can better protect itself. The key lesson of the last few months is that energy security means national security, and this means building up our long-term energy defences.
“That is why it would be perverse if any government reforms made it easier to invest in declining oil and gas fields than sustainable energy.”