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Political Agenda this week, by David Blackman

“BEIS didn’t want to be put on the spot about the cap”

Energy UK held its annual conference last week across the road from the Houses of Parliament. However, the venue may as well have been on a different planet.

Nobody from the Department for Business, Energy and Industrial Strategy (BEIS) even turned up. The no-show seemed doubly strange given that the event took place hot on the heels of two of the biggest energy policy moves in recent years – the publication of the draft price cap legislation and the Clean Growth Strategy.

Instead, it was left to a junior minister at the Scottish Office to fly the flag for the government.

It fell to Caroline Flint, Labour’s hammer of the utilities during her spell as Ed Miliband’s shadow energy and climate change secretary, to make the case for the price cap.

If BEIS ministers had turned up, they would have heard a note of barely concealed exasperation from the one big six boss who put his head above the parapet on the day. Eon chief executive Michael Lewis was clearly frustrated that the message is not getting across that the solution to lower prices is better competition rather than price regulation.

Maybe ministers didn’t want to be put on the spot about their commitment to a cap, which has been put into doubt by reports that BEIS officials have briefed investors that the legislation won’t ultimately be implemented.

However, energy companies and ministers need to find a way to communicate in order to prevent the capping debate developing a momentum that does lasting damage to the industry and its customers. Getting together in the same room would help.

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Customers

Political Agenda this week, by David Blackman

“Draft bill could be a ­mechanism to push Ofgem”

The government came under pressure last week from the opposition over the pace of its much trumpeted crackdown on prices.

It’s a fair question because despite the grandstanding, ministers are displaying a lack of urgency on the topic.

Ministers have published a draft bill instead of heading straight to legislation.

Draft bills have only been around since the Blair government, when the mechanism was invented to improve the quality of legislation. It became standard practice for laws to be published in draft form to iron out problems before they hit the politically charged atmosphere of the House of Commons chamber.

But draft bills have gone out of fashion since the coalition came to power. While there were more than ten published in 2012, there have only been three in each of the past two years.

It is unclear how long the process of prelegislative scrutiny will take or indeed the time it will take to go through parliament.

Then, once the legislation has cleared Westminster, Ofgem has estimated it will be at least another five months before a cap could be introduced. It begs the question, therefore, why has the government used the mechanism in this particular instance?

The reason may be that the cerebral Greg Clark wants to ensure the bill is watertight when it reaches parliament.

But a cynic might suspect the government doesn’t really want to legislate if it can avoid it, given the amount of time Brexit is likely to chew up. Instead, the draft bill could be a mechanism to push Ofgem into action.

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Policy & regulation

Political Agenda this week, by David Blackman

“Labour is opposed to the existence of utility firms”

The Labour Party annual conference was a much happier place this week than when it gathered last year. The party’s better than expected performance at this year’s general election means its mainstream has swung firmly behind the leadership of Jeremy Corbyn.
Shadow chancellor John McDonnell’s speech, in which he reaffirmed the party’s commitment to bringing back utilities into public ownership, shows that the policies outlined in June’s radical platform are now firmly entrenched within Labour.
Corporate Britain, including the utility companies, was out in force at this year’s conference.
For utilities, though, ­engaging with Labour’s current mood is hard given the party’s avowed opposition to their very ­existence.
To get a sense of how the tide of opinion is shaping up in the party, it was necessary to leave the plush hotels surrounding the Brighton Conference Centre and take a stroll on the seafront.
In a determinedly funky cafe bar with a good view of the offshore windfarm off the Brighton shoreline, the fledgling Labour Energy Group outlined its radical proposals to bring offshore wind into public ownership, which McDonnell picked up on in his keynote speech.
Energy UK made a bid to reach out to the new zeitgeist within Labour by focusing on vulnerable consumers in its pitch to members at the association’s own party conference meeting.
Whether they like it or not, utilities are going to have to take Labour’s radical turn seriously.

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Policy & regulation

Political Agenda this week, by David Blackman

“Falling offshore wind prices are a game-changer”

The steep fall in the cost of offshore wind power caught even the renewable energy lobby on the hop when the results of the latest contracts for difference auctions appeared this week.

It changes the politics of energy too. Lord Adonis, the Labour chair of the National Infrastructure Commission, is not the only figure to see Monday’s announcement as a “game changer”.

It means the clean growth strategy, which has taken so long to produce, will finally emerge in a very different political context that it would have done six months ago.

The proof that renewable energy can be generated more cheaply than gas and nuclear can be expected to further embolden climate change minister Claire Perry to publish the kind of “ambitious” plan she has previously promised.

The Tory grassroots backwoodsmen, whose hostility to windfarms has driven policy for the past couple of years, had already lost influence following their party’s failure to win a parliamentary majority.

It will be harder now for climate change sceptics to hide behind value-for-money arguments. And in a sign that the green energy bug is catching across Whitehall, Nick Hancock was loudly banging the drum at the international trade department for solar power this week.

Next month’s Conservative conference is likely to offer a warmer reception for Perry’s crusade to tackle emissions. After this week, the political debate on energy generation will never quite look the same again.

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Political Agenda this week, by David Blackman

“The ding-dong over energy costs is likely to get noisier.”

The temperature of the debate about energy costs rose several notches in this week.

Utilities have been seeking to deflect the ire over rising energy bills onto environmental levies, and energy companies have reportedly launched a fresh bid to push the costs of the low-carbon transition onto the shoulders of taxpayers rather than energy bill payers.

The Energy and Climate Information Unit, a green-leaning think tank, in turn tried to shift the blame for price rises onto the distribution network operators, accusing them of exploiting their local monopolies to trouser excessive profits. The Energy Networks Association was quick to rubbish that analysis as being based on old data.

All of these groups are trying to capture the ear of Professor Dieter Helm, the government’s choice to chair its snap review of energy costs.

The issue isn’t going to dissipate soon judging by last week’s figures from Ofgem that showed the gap between the big six’s standard variable tariffs and the cheapest deals on the market has widened this year.

Helm’s past critiques of renewables suggest that subsidies for more expensive and untried technologies will be lined up for the chop in his review.

However the ultimate call on curbing costs will be made by the government. And the debate on energy costs look set to figure prominently on the sidelines of the political party conferences. As the countdown to the review’s October publication nears, the ding-dong over energy costs is only likely to get noisier.

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