Ministers to offer business energy support package until early 2024
Ministers are close to finalising plans for a two-pronged package of support for businesses to help with energy costs all the way through next winter — when prices are feared to rise sharply again — and into spring 2024.
Jeremy Hunt, the chancellor, is drawing up a package that would give low-level universal support to all companies with their energy costs for the next 15 months — while providing extra targeted support to energy-intensive businesses.
This autumn, the government agreed to subsidise an energy price cap for six months under the Energy Bill Relief Scheme but companies had been facing a cliff edge when the scheme ends in late March. Beyond that the state would only subsidise a handful of the most “vulnerable” industries, ministers have repeatedly said.
Hunt’s announcement, which is expected before Christmas, would mark a major shift in the government’s approach to helping businesses with their energy bills, which have soared since Russia’s invasion of Ukraine sent gas prices spiralling upwards.
It reflects jitters at the top of government about the plight of companies having to deal with a leap in energy prices just as the country plunges into economic recession.
Under current plans, all companies would see the per-unit price of energy capped until April 2024, in line with an existing pledge to households.
However, Hunt wants to keep the cost of the package down given the tight squeeze on public finances.
The chancellor has conceded that in order to make the universal support affordable to the government there will have to be a higher price cap than under the existing support package. Energy suppliers will be able to charge a higher maximum price for corporate customers than at present.
On top of this there is expected to be a second, more targeted support package for businesses in vulnerable sectors, such as hospitality, as well as high-energy users in sectors such as steel manufacturing.
Those sectors would receive more generous support, according to several people with knowledge of the discussions.
Officials have told business groups this week that the full package could be announced by the chancellor as early as Tuesday next week, but that the details still needed to be signed off by ministers at Treasury, which declined to comment, and the department of Business, Energy and Industrial Strategy. “It is all still subject to change,” said one official.
The Financial Times
Rishi Sunak scraps Liz Truss’s long-term energy deal taskforce
Rishi Sunak has scrapped a taskforce launched by Liz Truss to secure long-term energy deals for Britain.
The Energy Supply Taskforce has been abolished after just three months.
Ms Truss unveiled the initiative in September as part of a package to tackle soaring energy bills caused by Russia’s invasion of Ukraine.
It was inspired by the UK’s Vaccine Taskforce, which was set up during the Covid-19 pandemic with a remit to secure effective vaccines as quickly as possible.
Headed up by Madelaine McTernan – the civil servant at the Department for Business, Energy and Industrial Strategy who led the Vaccine Taskforce – its aim was to negotiate with domestic and international energy suppliers to cut costs and secure supply via long-term contracts.
In October, the taskforce was reported to have been in talks with liquefied natural gas companies.
But on Saturday a Government source said it had been scrapped because it would have committed the UK to paying historically high prices for years on end.
They said: “Winding down the taskforce is the right decision – while it was sensible in September for the previous administration to explore these contracts, locking-in long term contracts while gas prices are this high just doesn’t make sense.”
Instead, the source pointed to the Government’s backing of the Sizewell C nuclear power plant, drive to insulate homes and signing of an energy partnership with the US.
The source added: “ was also only ever just one option on the table – there’s a whole range of other actions we’re taking now to boost the UK’s energy resilience, including a new £1 billion energy efficiency scheme, financial backing for Sizewell C and reintroducing the Energy Security Bill to parliament.”
However, an industry source disputed the Government’s characterisation of the Energy Supply Taskforce, saying that contracts under negotiation were not locked at higher rates and would have fallen when the market price of gas falls.
The Daily Telegraph
Water supplies will be turned off ‘for weeks’ amid summer heatwaves
Household water connections will need to be turned off “for weeks” on end and widespread rationing introduced as summers get hotter, according to the country’s biggest supplier.
Thames Water, which has faced a barrage of criticism for leaks and dumping sewage in seas and rivers, raised the spectre of widespread outages as droughts become more common during the summer.
In a public consultation on how it should fix its network, the company said: “As our climate changes, we’ll likely see more severe and frequent droughts.
“In severe droughts, water restrictions could see us rationing water for everyday activities or turning off supplies for certain periods during the day. Restrictions like this could last for several weeks.”
The water industry has been engulfed in a scandal over companies’ failure to invest its often Victorian infrastructure since privatisation three decades ago.
Suppliers are under growing political pressure to pump investment back into their businesses after campaigners and The Telegraph highlighted the impact of sewage pollution on the state of the UK’s rivers.
Meanwhile, an estimated 2.4bn litres of water is being lost every day across the UK because of leaky pipes.
The crisis has become so acute that water companies are now offering households incentives to use less water. South West Water announced plans to offer customers £30 of credit if reservoir levels recover to 30pc of capacity by the end of the year, for instance.
Thames Water was one of six companies criticised by name for poor performance by Ofwat last week. The regulator said it was “deeply concerned” about the firms’ actions despite recent mitigating measures.
Sarah Bentley, the company’s chief executive, said: “If we are to ensure a secure and sustainable water supply for future generations, we need to act now, to protect our communities and our environment against the impact of drought and water shortages.
“Even after reducing leakage and water usage across our region, we will still need an extra one billion litres of water every day for customers by 2075 to accommodate climate change and population growth. Planning and constructing new resources takes time, which is why we must start now, otherwise we will have more restrictions and shortages in the future.”
The Daily Telegraph
Grant Shapps launches campaign advising people how to save money this winter
Grant Shapps has launched a public information campaign advising people how to make financial savings this winter – months after the former prime minister Liz Truss blocked it.
The £18m campaign, called It Adds Up, claims people could save £230 a year by implementing what is says are simple measures.
Radio and TV adverts will be rolled out and a dedicated website, Help for Households, will be launched to encourage people to restrict use of their electrical appliances.
The campaign launched with a video in which the energy secretary encourages people to save money by stopping draughts and turning down boilers and while battling with a pesky Elf on the Shelf.
The 65-second clip, shared online on Saturday morning, immediately drew ridicule on social media.
The campaign launch comes weeks into the winter, with temperatures across the UK falling to below freezing while energy bills have risen significantly.
Two months ago, Truss chose to ignore the government’s climate advisers by opposing a winter energy-saving campaign.
The climate change committee wrote to Truss, who would soon after be forced to resign, as early as September outlining the need for a “comprehensive energy advice service” to reduce demand.
“Public awareness of what can be done to reduce energy use is too low,” the advisers wrote.
“Specific advice on this could help in the near term by increasing awareness of low or zero-cost actions that could reduce wasted energy straight away, such as lowering boiler flow temperatures and simple draught proofing.
“Lowering boiler flow temperatures can reduce gas consumption alone by 6% to 8%.”
Clare Moriarty, the chief executive of Citizens Advice, said: “This winter, many people will be worried about how much they might have to spend to heat their homes. These tips should help cut down the cost of staying warm.”
The Guardian
Electricity companies warn they remain at risk of cash crunch
Electricity companies are urging the UK government to boost access to a £40bn state-backed liquidity support scheme, as continued price volatility in wholesale power markets reignites fears that some suppliers and generators might run out of cash.
The Treasury and Bank of England in October set up an emergency liquidity facility to tackle the margin requirements faced by power generators and suppliers that hedge their sales or energy purchases in the futures market.
Collateral requirements for energy companies across Europe have ballooned as Russia’s invasion of Ukraine has triggered extreme volatility in wholesale energy markets.
The UK has followed a string of other European governments in offering liquidity support to the sector. Finnish economy minister Mika Lintilä in September warned the problem had all the ingredients to create a “Lehman Brothers” moment in the energy sector, referring to the collapse of the US bank during the 2008-09 financial crisis.
Trade body Energy UK told the Financial Times it remained “very concerned” about financial liquidity across the UK power industry “over the coming months” and warned the conditions attached to the government’s £40bn facility meant it was not available to companies that may need it most.
The £40bn “energy markets financing scheme”, which opened to applications in mid-October, is on offer only to companies that are of “good credit quality” and which make a “material” contribution to UK electricity and gas markets. Suppliers, for example, need to have more than 750,000 customers to qualify.
Any company that makes use of the scheme will be blocked from paying dividends or bonuses to executives.
Analysts say smaller suppliers and generation companies that are not part of big, diversified companies are at greatest risk of running out of cash this winter as cold weather has sparked further volatility in power prices.
Energy UK and individual suppliers have raised the matter in meetings with the government since the scheme’s launch, according to people familiar with the situation.
Chris O’Shea, the chief executive of British Gas-owner Centrica, has said he believes many rival suppliers are “struggling for cash” and could go bust in a repeat of the market turmoil of 2021, which saw more than 30 energy retailers collapse.
Energy UK’s deputy director Adam Berman said the sector “remains very concerned about financial liquidity over the coming months”.
“While the government has put the Energy Markets Financing Scheme in place to address this problem, it will have to go further to ensure this facility is available to companies across the sector.
“Generators and suppliers face extremely challenging conditions due to the ongoing market volatility. An enhanced government backed liquidity programme is the best way of safeguarding the financial resilience of the sector,” Berman added.
Philippe Commaret, managing director for customers at EDF Energy, one of Britain’s top six suppliers, told the FT that liquidity problems in forward energy markets were also pushing up prices for households and businesses.
Fewer electricity generators were trading their output in forward markets because of ballooning collateral requirements and were instead selling in spot or day-ahead markets where they did not face the same cash demands. As a result, prices in forward markets have increased, he warned.
“If we were able to find a way to crack this issue of illiquidity on the forward market, it would have a big impact on the prices for customers,” Commaret said.
The Financial Times
Power supplies restored to all Shetland homes after storm
All 5,289 homes that lost power in Shetland at the beginning of the week have now had their supplies restored.
Scottish and Southern Electricity Networks (SSEN) said the last 24 properties initially cut off were reconnected at 16:00.
A major incident was declared on Tuesday after snowstorms brought down power lines.
Justice Secretary Keith Brown thanked everyone involved in the recovery effort.
Teams of engineers had travelled by ferry to Shetland during the week to help fix the network and restore supplies.
SSEN said a 160-strong team had focused on the areas experiencing the worst of the damage caused by line icing, where snow and ice accumulated on large sections of power line, bringing down overhead lines and breaking wooden electricity poles
While engineers were battling to restore supplies to the final properties, a further 94 lost power due to a secondary fault. However, SSEN confirmed these properties had now also been reconnected.
Mark Macdonald, head of region at SSEN Distribution, said: “On behalf of everyone at SSEN, I’d like to thank customers and communities for their patience as our teams battled to restore supplies and assist the welfare effort.
“We recognise it was a difficult time for many, and this helped drive our teams to restore power as quickly as possible.
“The scale of ice-loading on our network from Monday’s storm brought comparisons of when the ‘Big Snaa’ hit Shetland in 1995, with many of our teams and residents saying the scale of damage this time was even worse.
“I’m immensely proud of the teams for their dedication and commitment in overcoming significant engineering challenges and getting the job done.”
BBC News
SSE begins work on hydrogen storage cavern on Yorkshire coast
The energy company SSE has begun work to develop an underground cavern in east Yorkshire to store hydrogen, aiming to stockpile the renewable source of power for when the freezing, windless conditions experienced in the last week occur in future.
The project will produce hydrogen using renewable energy in a 35-megawatt electrolyser which will be stored in a cavern the size of St Paul’s Cathedral located a mile deep at an existing SSE site in Aldbrough on the Yorkshire coast.
The hydrogen will be used to fire a turbine which can export power to the grid when demand is high.
SSE hopes the “pathfinder” project, which could cost more than £100m, will demonstrate the technology before bigger projects in the area which would require larger pipelines and infrastructure. The company hopes to receive government money for the project through a fund set up to support low-carbon hydrogen projects.
Catherine Raw, managing director of SSE’s thermal division, told the Guardian: “Even if hydrogen is expensive relative to other fuels, you’re able to deliver the power exactly when you need it during peak demand and when power prices are justified. So this would be, even as a research and development project, helping to ease that system pressure during periods of peak demand like we’ve just seen.”
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.