Energy debt bankruptcies set for record
Energy suppliers are on course to file a record number of winding-up petitions against business customers this year as companies struggle with soaring energy costs.
There have been more than 400 attempts by suppliers to shut down companies to reclaim their energy debts over the past decade, according to court filings. The vast majority were made by British Gas, Eon and npower, now part of Eon.
British Gas and Eon, two leading business suppliers by customer numbers, between them have filed 30 such winding-up petitions in the first four months of the year. If this were to continue at the same rate, 2023 would be a record year, analysis by Harcus Parker, the law firm, suggests. About half of petitions typically have resulted in the targeted companies being shut down, it said.
Thousands of businesses are struggling with energy costs after Russia’s invasion of Ukraine led to a surge in wholesale gas and electricity prices.
The findings have prompted calls from business groups for a moratorium on winding-up petitions. Harcus Parker is also arguing for a moratorium while it brings a £2 billion class action legal claim against several energy companies over allegedly undisclosed commission payments to third-party brokers, which are widely used to sell energy deals to businesses.
The law firm claims that some of the companies targeted may have had to pay inflated tariffs as a result of what it alleges were “hidden” commission payments. Damon Parker, a partner at Harcus Parker, said: “It appears to us that energy companies have sought to wind up a significant number of entities on the back of contracts that contain ‘hidden’ or ‘secret’ commissions paid to brokers purporting to act for businesses.
“We are acting for hundreds of businesses who are seeking repayment of those commissions. If those claims are successful, it is possible that some or all of these failed businesses ought never to have been wound up.”
The Federation of Small Businesses has warned that more than 90,000 small businesses are at risk after signing up to fixed deals in the second half of last year, when rates were at their peak.
Tina McKenzie, policy chairwoman at the federation, said: “Large energy suppliers must give vulnerable small businesses every chance to pay their bills. If winding-up petitions are being issued in great numbers, without support being provided, then there’s a need for a moratorium to be imposed.”
A British Gas spokeswoman said: “Our debt policy is fair, with robust controls in place. We seek to engage early with business customers to discuss the support and options available and are able to offer extended payment plans where appropriate.
“We do not treat winding-up petitions lightly and only consider them in specific circumstances where there is clear liability, the company has a sizeable balance and appears to be soluble with a healthy asset position. Winding-up petitions account for a very small proportion of our aged debt. We recognise that the current economic climate is difficult for smaller businesses, which is why we committed to a £15 million small business debt relief package for those struggling over the last winter.”
She added that “the relationship between a broker and a business customer is separate from their relationship with British Gas”, all brokers were required to comply with transparency regulations and British Gas had complied with all rules.
Read the full story in The Times
Energy companies making ‘war profits’ – Reeves
Energy firms are making “war profits” from the surge in oil and gas prices following Russia’s invasion of Ukraine, the shadow chancellor has said.
Rachel Reeves has told the BBC that companies should be “taxed properly”.
Last year, the government introduced a windfall tax on profits made from extracting oil and gas in the UK to help fund a scheme to lower bills.
A Treasury spokesperson said the profits are being used to “ease pressure on families” in the UK.
“These funds are being used to hold down people’s energy bills and fund one of the most generous cost of living packages in the world- worth £94bn, which is around £3,300 per household this year and last,” the spokesperson said.
The Energy Profits Levy (EPL), introduced in May last year, is set at 35% and together with other taxes takes the rate on oil and gas companies to 75%.
The levy applies to profits made from extracting UK oil and gas, but not from other activities, such as refining oil and selling petrol and diesel on forecourts
However, David Whitehouse, chief executive of OEUK, the offshore industry body which represents oil and gas companies in the north sea, said: “This level of tax discourages investment and undermines our companies, our jobs and our communities.”
The Labour party has pledged to extend the windfall tax further, but has not indicated by how much.
In an interview with the BBC’s economics editor Faisal Islam for Newscast, Ms Reeves said: “There needs to be a proper windfall tax on the huge profits the energy giants are making, because while they make huge profits, people are paying huge bills.
“Those are the windfalls of war, they should be taxed properly, to help people with a cost-of-living crisis,” she added.
“They are war profits. The only reason that energy prices rose like that is because of Russia’s illegal invasion of Ukraine. And the energy companies have benefited with higher profits on the back of that, and everybody else has been saddled with higher bills.
“Those are not profits because of the great ingenuity of the companies… that money should go into helping families with their energy bills and helping businesses who have also seen their bills go up.”
Earlier this month the energy giant Shell reported profits of £7.6 billion for the first three months of the year. BP posted first quarter profits of £4 billion.
The vast majority of both companies’ profits are earned overseas and are therefore not covered by the UK’s windfall tax.
A windfall tax is used to target firms which benefit from something they were not responsible for.
Energy firm profits have soared recently, initially due to rising demand after Covid restrictions were lifted, and then because Russia’s invasion of Ukraine raised energy prices.
BBC News
Ukraine built more onshore wind turbines in past year than England
Ukraine has completed more onshore wind turbines than England since it was occupied by Russian soldiers – despite the UK government’s promise to relax restrictions on onshore windfarms.
Only two onshore wind turbines have been installed in England since Russia invaded Ukraine in February last year, generating 1 megawatt (MW) of electricity in the Staffordshire village of Keele.
Ukraine’s Tyligulska wind power plant, meanwhile, the first to be built in a conflict zone, has begun generating enough clean electricity to power about 200,000 homes just 60 miles from the frontline in the southern region of Mykolaiv, with 19 turbines providing an installed capacity of 114MW.
Ed Miliband, the shadow climate change secretary, said: “This extraordinary revelation is a terrible indictment of Rishi Sunak and his staggering failure to end the onshore wind ban.
“Even governments fighting for their very survival can get on and build the clean energy infrastructure needed to tackle the cost of living crisis, the energy security crisis, and the climate crisis with more urgency than the Tories can muster.”
No 10 promised last year to dismantle an effective ban on onshore windfarms in England, which was put in place in 2015 by tightening planning restrictions in the national planning policy framework. However, the government is yet to make any changes and campaigners believe a rebellion of backbench Tory MPs threatens to pile pressure on ministers to make only modest tweaks to the framework, which would continue to hold back the rollout of English windfarms.
The ban on onshore wind, which is the cheapest source of electricity, is estimated to have cost UK billpayers £800m over the past winter when millions were plunged into fuel poverty for the first time due to rising global energy market prices, according to analysts at the Energy and Climate Change Intelligence Unit (ECIU).
British households face energy bills that are expected to remain above pre-pandemic levels until the end of the decade after Russia’s invasion of Ukraine triggered a surge in global energy markets last year. Although global prices have retreated from record highs they are likely to remain far higher than usual while European countries seek alternative energy sources to help replace Russia’s gas exports.
Miliband said the Conservatives’ “absurd ban on onshore wind” had cost every family in Britain £180 and left the energy system “dependent on fossil fuel dictators like Putin”.
Sam Richards, the founder and campaign director of Britain Remade, which campaigns for green economic growth, said: “It’s simply mind-boggling that Ukraine, while it fights for its survival, has built more onshore wind capacity than England.
“The government should start by dropping its ban on new onshore windfarms in England – at the stroke of a pen unlocking the cheapest source of energy available.”
A government spokesperson said: “Since 2010, we’ve increased the amount of renewable energy capacity connected to the grid by 500% – the second highest amount in Europe – installing 3,790MW of additional capacity across all renewables in 2022 alone.”
“We continue to support more renewable projects to come online, including onshore wind if there is local community backing, as clean, more affordable energy brings down costs for consumers and boosts our long-term energy security.”
The Guardian
Grid bottlenecks delay transition to clean energy
How soon the world reaches net zero carbon emissions depends on how quickly it can put up solar panels and wind turbines, adopt electric vehicles, and install heat pumps.
But there is another, often overlooked, piece of the puzzle: the power lines required to transport all the new renewable electricity from where it will be produced to where it will be consumed. That is going to be a massive capital project.
The global network of cables will need to double in length between now and 2050, say analysts at research provider BloombergNEF, to reach 152mn kilometres — roughly the distance between the Earth and the Sun.
Achieving that will require some $21tn of investments by 2050. Or, to put it another way, “the network will soak up 30 per cent of all the investment required by the energy transition”, according to Lord Adair Turner, chair of the Energy Transitions Commission, a business coalition pushing for net zero.
Tomorrow’s network will need to be very different from the one we have today, in terms both of its size and its shape. “The grid will have to evolve to carry a lot more electricity,” Turner says.
“As we phase out fossil fuels and switch to EVs and heat pumps, electricity is going to account for almost 70 per cent of the global energy mix, up from 20 per cent today.”
In the UK, net zero scenarios see electricity consumption increasing from the current 300TWh to around 650TWh by 2050. In the EU, annual electricity demand is forecast to more than double from 3,000TWh today to 6,800TWh by 2050.
Peak demand will rise by more, as the electricity system increasingly supplies winter heat.
The way electricity is generated will change, too. The network evolved to transport electricity from a few big coal or gas plants, located near big towns.
In net zero economy, it will need to carry electricity from myriad smaller-scale renewable developments, located where there is a lot of sun or wind.
For the UK, the North Sea will be a key producing area. In Italy, electricity will be generated in the sunnier south.
From an infrastructure perspective, that has two implications. The first is that the grid’s main trunk-lines will need to be reinforced, so that it can transfer additional electricity from, say, Scotland to London. And the second is that networks will need to build a lot of new connections to link smaller developments to the grid. Both objectives are challenging.
Big grid projects take a long time to build. The UK has managed to add some 4GW of new transfer capacity to the grid over the past decade. Over the next decade, it needs to build 17GW, according to energy research company Aurora.
National Grid ESO, which runs Great Britain’s electricity system, reckons the country will need to invest at least £50bn in its electricity transmission network by 2030.
The whole cycle, from planning to permitting, through procurement and construction, lasts more than a decade. That may be compressible — for instance, by streamlining the permitting process. But there are those who believe that, to have any chance of the grid being ready on time, we need a radically different approach.
“Regulation has been looking out of the back window,” says Sir Dieter Helm, professor of economic policy at the University of Oxford. “Its main objective has been to minimise cost, which means it has only allowed the network operator to build where demand was already visible.”
Instead, the system operator should look at a map and come up with its own plan of how the network should evolve, Helm suggests. “We know where renewable electricity is going to be produced and where it is going to be consumed, and can start to make the required investments,” he says.
The downside is that the cost of infrastructure is spread across each unit of electricity consumed. If providers build ahead of new demand then, in the initial stages, existing consumers will pay the cost of the new infrastructure, too.
The second leg of the infrastructure challenge, connecting lots of small power generators to the grid, is also running late. Only 4 per cent of grid applications made from 2018 to 2021 have so far resulted in a connection, says Aurora.
This implies projects that might already be able to contribute to the country’s energy consumption are being held up. New projects applying today are being quoted connection times into the next decade. “We have a project in Durham where connection is scheduled for 2036,” says Greg Jackson, chief executive of power supplier Octopus Energy. “No one is going to wait 13 years.”
Read the full story at the Financial Times
Return of the energy startups as falling gas prices tempt new players
He is a former cricketer who owns a used car business and whose last venture collapsed. So who better than Grant Nicholson to start an energy supplier?
Stallion Power, the entrepreneur’s start-up based in Leeds, applied to Ofgem this month for licences to supply homes with electricity and gas. It is an audacious move from someone whose former energy broker business, Planet-U Energy, is going through an administration process after collapsing in July 2021.
Nicholson, 29, is one of several new applicants seeking energy supply licences now that wholesale electricity costs are falling again. Industry sources see startling echoes of the build-up to the energy crisis when a wave of new players entered the market, only for more than 30 to fold, costing bill-payers nearly £3 billion.
Ofgem announced last week that the energy price cap would be coming down in line with falling wholesale prices. Jonathan Brearley, the regulator’s chief executive, said new players were applying to become registered suppliers.
“We are seeing licence applications come into Ofgem and, of course, subject to the financial part of that to make sure they’re robust enough to manage, then we’d welcome that,” Brearley told MPs on the Commons public accounts committee.
He added: “We absolutely want to make sure we don’t go back to 2021, but equally we want to make sure that we have a diverse and competitive market.”
Before the energy crisis in 2021, Ofgem ushered in new entrants promising cheaper prices than incumbents, such as British Gas, could offer. None needed any experience in energy. None underwent any proper checks.
The Times
Good news on energy bills — no such luck on standing charges
Energy bills will fall for most households from July thanks to a drop in the price cap set by the regulator — but do not expect your standing charge to change.
The cap on unit prices that suppliers can charge will fall from 33.2p to 30.1p for electricity and from 10.3p to 7.5p for gas. This will work out at £2,074 a year for the average dual-fuel household’s usage. At the moment the cap works out at £3,280 for the average usage, but the government’s energy price guarantee is subsidising costs to limit average bills to £2,500 a year.
After the cap is lowered in July, households will still pay their supplier an average of 82p a day (£299.30 a year) in standing charges, which apply even if you use no electricity or gas. These fees cover the upkeep and maintenance of the energy infrastructure, such as the pipes and wires that bring gas and electricity to homes, and the cost of social and environmental schemes such as the £150 warm home discount scheme.
Lower overall bills will mean that standing charges will make up 14 per cent of the average annual household energy bill from July, up from 12 per cent.
The drop in the price cap will be the first since October 2021. A worldwide gas shortage and Russia’s invasion of Ukraine pushed the price cap up to £4,279 in January, although consumers were shielded from that by the government’s subsidy.
The consultancy Cornwall Insight, which has accurately predicted Ofgem’s price cap in the past, expects it to fall to £1,959 in December. Energy standing charges are likely to increase again to 84p a day (£306.60 a year) because the average gas network charge will be higher, it said.
In October 2021 standing charges were 51p a day. They have increased sharply to cover the cost of the 31 energy suppliers that collapsed in 2021 and 2022.
The Times
Watchdog fines just four companies despite 300,000 sewage spills
The environment watchdog prosecuted just four water companies for breaching an overflow permit between 2018 and 2022 despite hundreds of thousands of sewage spills over that period, according to official data. Southern Water, Severn Trent, Anglian Water and Yorkshire Water were prosecuted by the Environment Agency and fined a total of just over £94mn in seven cases.
A single fine levied against Southern Water accounted for £90mn of that total, according to data obtained through a Freedom of Information request submitted by the Financial Times. The cases involved breaches of “storm overflow” permits, which allow waste water to be released from the sewerage system into rivers or the sea under certain circumstances, to prevent it from being overwhelmed.
The dearth of prosecutions comes against a backdrop of growing public anger over the volume of sewage polluting the UK’s waterways and seas, which has prompted fierce criticism of water companies and regulators. Water companies paid out £1.4bn in dividends last year, according to FT research.
In 2022 alone, 10 water and sewerage companies operating in England discharged sewage into rivers and the sea on 301,091 occasions. Campaign groups say the EA is critically under-resourced and unable to hold companies to account for environmental offences. “Environmental protection has been defunded” as a result of years of austerity measures, said Charles Watson, founder of River Action UK, a charity and campaigning group, this week.
“We are dependent as the public and business on the regulators doing their job and they’re not.” Rebecca Pow, a junior environment minister, said in March that the volume of sewage entering the UK’s waters was “unacceptable”. Although many of last year’s more than 300,000 sewage spills were legal, there were 554 breaches of storm overflow permits in 2022, and more than 1,600 since 2020, according to government data, which did not disclose what penalties were imposed.
Ofwat, the water industry regulator, has fined just one privatised utility for breaching regulations designed to prevent sewage spills in England since the rules came into force almost 30 years ago. The regulator is now investigating six water companies over concerns that they might have breached sewage regulations, while the EA is looking into potentially illegal discharges at more than 2,000 sewage works.
Southern Water said it was “at the forefront of the industry in monitoring and self-reporting to the Environment Agency”. Applications at sites without permits “were submitted and are pending”.
Yorkshire Water said it operated “over 2,200 overflows across the region and whilst it is rare, sometimes things can go wrong and we’re unable to operate to the standards set out in the permit. If it does, we do everything we can to minimise the impact to the environment.”
Anglian Water and Severn Trent declined to comment.
The Financial Times
30 water treatment works released 11bn litres of raw sewage in a year, study suggests
Eleven billion litres of raw sewage were discharged from a sample of 30 water company treatment works in one year, new research suggests.
The study aimed to reveal the volume of discharged effluent released from storm overflows by water firms. Companies are not forced to reveal the volume of raw sewage released during discharges. They are only required by regulators to provide data on the number of discharges and the length of time they lasted.
Recommendations by MPs on the environmental audit committee that volume monitors be installed by water companies have so far been rejected by ministers.
In a study of 30 treatment works in 2020 run by nine of the 10 water and sewerage companies in England and Wales, the volume of raw sewage discharged was estimated at 11bn litres – or the equivalent volume to 4,352 Olympic pools.
Prof Peter Hammond, a mathematician who analyses data on sewage discharges, carried out the research. He has previously given evidence to MPs to reveal that the scale of illegal discharges of raw sewage by water companies is 10 times higher than official data suggests.
Hammond said it was vital to establish the volume of sewage discharges by water companies. He said his research suggested the government’s target to reduce raw sewage releases to 20 per year by 2025 was not robust because there was no requirement to reveal the volume of raw sewage discharged for each release.
“There is still no data readily available showing the volume of untreated sewage discharges,” he said. “Water companies have some idea, but the regulators and the government probably have no idea. Sewage detritus in rivers, on beaches and in seas offers clues but may not reflect the volume of discharges.
“So what is the potential discharge volume for 20 spills per overflow per year?”
Of the 30 treatment works analysed, only one – Mogden sewage treatment works in west London – has volume monitors fitted. In 2020, Mogden, which serves more than 2 million people, released a volume of raw sewage equivalent to 2,768 Olympic pools.
Read the full story at The Guardian
Sewage spills blamed as E coli forces Cornish shellfish sites to close
“Very high” levels of E coli found in oysters and mussels have led to the closure of 11 shellfish production zones in Cornwall.
In an email seen by the Guardian and Watershed Investigations, the Cornwall Port Health Authority (CPHA) told food business operators they “must not collect the affected animals from this area by any method. It is unsuitable for their production for health reasons and has been temporarily closed.”
The main sources of faecal contamination are generally agriculture, sewage and urban pollution, according to the Environment Agency.
Levels of E coli are measured per 100g of flesh. For a shellfish area to be considered “class A”, which means no cleaning of the produce is required before sale, 80% of samples must contain less than or equal to 230 E coli bacteria/100g. Shellfish from areas that breach this limit have to be extensively treated and the sale of those from areas where levels exceed 46,000/100g is prohibited.
In the 11 closed areas around the rivers Fal, Truro and Carnon, the E coli levels reached up to 92,000/100g. The CPHA said the readings were very high and that anyone who continued to harvest shellfish from these areas faced fines or imprisonment for up to two years.
The shellfish industry is furious with the government for not tackling the problem sooner.
James Wilson, a water quality project manager from the Shellfish Association of Great Britain, said: “The industry has been saying to government for years that we need to clean up our waters. We’re constantly fobbed off it constantly gets worse.
“We shouldn’t turn our waters and seas into a sewage dumping ground. We should be growing more stuff in the sea. There’s lower climate change impacts to producing oysters compared to other animal proteins but we’re doing less and less of it, certainly in comparison to neighbouring countries.”
The industry has had to learn to work around pollution caused by other sectors.
Martin Laity, a Cornish oyster producer, said: “We know when to harvest, we know when the rivers are dirty … and we’ve never poisoned anyone. But how the hell did the water companies get permission to ?”
Read the full story at The Guardian
Utility Week’s weekend press round-up is a curation of articles in the national newspapers relating to the energy and water sector. The views expressed are not those of Utility Week or Faversham House.