by Janet Wood
The lack of consensus within major energy companies about Electricity Market Reform was laid bare as executives gave evidence to MPs on the Energy and Climate Change
Select Committee this week.
The splits were evident even as committee chairman Tim Yeo, pointing out the truncated timetable for the inquiry and the draft Energy Bill itself, urged the companies to come to a consensus on some areas where the Bill lacked clarity.
One issue most companies agreed on was that delays to the rebanding of the Renewables Obligation, and what appeared to be politically motivated paring of support levels, had badly damaged confidence in forthcoming mechanisms.
Scottish Power chief executive officer Keith Anderson said consultation and evidence had been overtaken by political argument. Now he – and investors – feared a similar lack of evidence base in setting strike prices for contracts for differences (CfDs).
Well-publicised concerns about
the counterparty for CfDs were also raised by all witnesses, although there was less consistency over whether government had to stand as guarantor behind the counterparty.
Government backing would help lower costs, the companies said, but more important was that the counterparty be clearly identifiable, and contracts with it be enforceable and financeable. Contract risk was easier to manage than political risk, one witness suggested.
The companies also had concerns about caps on subsidy levels that had “crept in” to the Bill. The so-called levy control framework had not been in earlier consultations and its rigid framework could halt investment, they said.
Yeo said the committee had invited the Treasury to give evidence on the levy control framework and other matters – so far without success.
This article first appeared in Utility Week’s print edition of 15 June 2012.
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