Weekend press roundup: Sunak accused of ‘slyly’ reintroducing green levies

Rishi Sunak has been accused of “slyly” reintroducing green levies as the government stops subsiding energy bills when the new price cap comes into effect in July. Also in our round-up of the weekend papers, surging costs put several major offshore wind projects in jeopardy and the Liberal Democrats highlight a “revolving door” between water companies and regulators.

Rishi Sunak to hit households with £170 net zero green levy

The two-year suspension of green levies announced last autumn is to end from the beginning of July, The Telegraph has learned

Households will pay a £170-a-year green levy on energy bills in the coming days, with Rishi Sunak and Jeremy Hunt accused of “slyly” shifting costs back to consumers.

The Telegraph has learned that the two-year suspension of green levies announced last autumn is to end from the beginning of July, after just nine months.

The cost of the levies was shifted from consumer bills to be funded instead by the Government, following a year-long campaign by energy firms and MPs amid spiraling gas, electricity and food prices last year.

It will again be imposed on consumers, although there has been no formal announcement. Sir Jacob Rees-Mogg, who was business and energy secretary when the costs were taken away from consumers last year, said: “Green levies are part of the problem behind the UK’s particularly high electricity prices. They ought to be abolished but should fall on general taxation until that can happen. The ambition for net zero must not make us cold and poor.

“Any new or re-imposed charge ought to be announced to Parliament first and not slipped through slyly.”

The decision to fund the green levies via general taxation, as opposed to consumer bill payments, was announced by Kwasi Kwarteng, the then chancellor, when he unveiled the energy bailout used by the Government to subsidise consumer bills since its creation in October.

At the time, the Government said: “Schemes previously funded by green levies will also continue to be funded by the Government during this two-year period to ensure the UK’s investment in home-grown, secure renewable technologies continues.”

But the Treasury will stop funding the cost – which has risen from £150 last year to £170 now – from July, meaning that it will be borne by consumers once again.

A Treasury source insisted that the move was “not an active decision of this administration”.

Due to the way the Energy Price Guarantee (EPG), the government bailout, was designed, it covered the green levies on bills, the source said. From July, when EPG subsidies will end for most bill-payers, so will Treasury funding of the green levies.

The disclosure prompted astonishment among senior Tories – particularly after Grant Shapps, the Net Zero Secretary, told The Telegraph on Saturday: “We know we need to fund this transition, but we don’t want to do it through household levies … I don’t want to see people’s household bills unnecessarily bashed by this.”

Mr Shapps said he wanted to scrap plans for a new £120-a-year levy to fund the hydrogen industry. However, days after his remarks, consumers will once again be saddled with the £170-a-year cost of levies that fund other “green” schemes, ranging from the installation of home insulation, to historical contracts with wind farm developers.

Tory parliamentarians and Government figures consulted by The Telegraph said they had expected the charges to be borne by the Treasury for at least the two-year period announced in September. Critics of the levies had expected a public debate about whether the charges should then be reimposed on consumers, either in part or in full, or scrapped altogether.

A Government spokesman said: “The Government pledged to provide £150 to covering green levies included in energy bills for two years through the Energy Price Guarantee. By the end of June, this Guarantee will have saved a typical household in Great Britain around £1,100 in total, which includes the £150 we committed to.

“However, the EPG will no longer be in effect from July 2023 as Ofgem’s price cap will be set below the EPG’s discount level, meaning customers will pay energy rates in full, including for green levies.

“Levies more than pay for themselves by driving investment in renewables and other generation technology and have saved consumers money on their energy bills overall over the past 10 years.”

The Telegraph

Britain’s future as ‘Saudi Arabia of wind’ in doubt after surge in costs

A string of offshore wind projects meant to power Britain are in jeopardy after the global race to net zero sent costs soaring, casting doubt over the industry’s future as a cheap source of energy.

A surge in supply chain costs has pushed up the price of wind turbines, while increases in global interest rates have raised refinancing costs substantially.

It has made several projects unviable just a year after they won government subsidy contracts – leading to fears from industry insiders that Britain’s future is in jeopardy as the “Saudi Arabia of wind”.

Inch Cape, a 50:50 joint venture between Ireland’s ESB and China’s Red Rock Power to develop a project located 15km off the east coast of Scotland, is understood to be at risk, with the Irish side refusing to proceed with a so-called final investment decision (FID) after balking at the economics of the project.

One source said: “People won’t invest if it doesn’t give you a decent return on equity. And presently, it’s hard to see how it can.”

Schemes developed by Danish company Ørsted and Swedish player Vattenfall are among other projects understood to be at risk, as the industry seeks more government help to ensure projects remain viable.

Senior executives have also described Net Zero Secretary Grant Shapps as a “remote” figure who is reluctant to engage with company bosses.

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Last year’s CfD auction was the biggest to date and secured enough capacity to provide more than 10 million homes with clean power.

However, it is understood that the £37.35 strike price secured by Inch Cape is currently “below the waterline” for ESB, meaning they are not satisfied with the level of returns on offer.

“It should be nearer £50 to £55,” a source said.

The Norfolk Boreas offshore wind farm operated by Vattenfall is also understood to be at risk as costs mount.

A spokesman admitted that market conditions were “extremely challenging”, suggesting that a final investment decision was not forthcoming. He warned that the Government must reflect the realities of the market, suggesting Vattenfall was unwilling to proceed without more state help.

Catrin Jung, the company’s head of offshore wind, said: “Vattenfall has not yet taken FID on the Norfolk Boreas offshore wind farm.

“Market conditions are extremely challenging currently, with rising costs and a supply chain crunch as well as increasing costs of capital. We are looking at the best way forward for all three projects which make up the 4.2GW Norfolk Offshore Zone and how we can work with the supply chain, including what opportunities there are for UK businesses.”

Ørsted’s Hornsea 3 in the North Sea is also understood to be at risk, although a spokesman insisted that the company was “increasingly confident that we will be in a position to take a Final Investment Decision during 2023”.

The spokesman added: “The offshore wind sector has delivered huge growth in the UK over the last decade but it has arrived at an inflection point.

“It will require continued focus from stakeholders in Government and across industry to ensure offshore wind delivers on its potential to become the backbone of the UK’s energy system and bring further investment, provide low-cost electricity for consumers and help deliver our net zero ambition.”

Insiders suggested that Red Rock Power, a subsidiary of China’s state-backed SDIC, is willing to proceed with Inch Cape at a loss in order to avoid the embarrassment of abandoning what would be its biggest investment in offshore wind in Europe.

However, it is understood that any decision to proceed would have to involve a project redesign.

A joint statement issued by ESB and Red Rock Power said the companies remained “strategically aligned and committed to the delivery of the Inch Cape Offshore Wind Farm project”.

A Department for Energy Security and Net Zero spokesman insisted that Mr Shapps “regularly engages with the industry”.

The Telegraph

‘Revolving door’ of staff between water firms and regulators clamping down on sewage ‘stinks’

There is a “revolving door” of executives between regulators supposed to clamp down on sewage spills and water companies, raising questions about a “conflict of interest”, an investigation has revealed.

At least six senior current industry staff members have been identified as moving jobs between regulators including Ofwat and the Environment Agency and water firms such as Southern, Northumbrian and South West Water.

It has triggered warnings that regulators could feel “sympathetic to their mates at their former company” or “water company executives who know how to avoid regulations”, and calls for the anti-corruption watchdog Acoba (Advisory Committee on Business Appointments) to investigate.

The investigation by the Liberal Democrats found that despite the movements between such organisations, numerous freedom of information requests and parliamentary questions submitted by the party indicated the Government holds no data on how many former water company employees work for industry regulators.

Lib Dem environment spokesman Tim Farron said: “This raises questions about conflict of interest. You could have regulators who feel sympathetic to mates at their former company, or water company executives who know how to avoid regulations.

“If this is happening, then the whole thing is a farce.”

Mr Farron, a former leader of the Lib Dems, added: “I fear we may now have a revolving door between water companies, the regulator and even government agencies. We can’t have a cosy job club in this industry given the environmental scandals being committed. There needs to be an independent investigation into this.”

The Liberal Democrats have called for Ofwat to be scrapped and replaced with a new water and sewage regulator in England and Wales amid controversy over levels of sewage spills in waterways across the UK.

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South East Water blames working from home for hosepipe ban

A water company boss has angered customers by blaming a hosepipe ban that will hit households across Kent and Sussex next week on people choosing to work from home.

South East Water, which supplies more than two million homes and businesses, will impose the first new hosepipe ban of the summer on Monday. The company left thousands of customers without mains water for as long as six days earlier this month.

Its stocks of untreated water are in a good position, with its largest reservoirs either full or close to full.

However, David Hinton, its chief, executive, claimed today that a change in lifestyles had put its treatment works under too much pressure. Working from home was a “key factor” behind the hosepipe ban, which is designed to rapidly cut demand and could involve penalties of up to £1,000, he said.

“Over the past three years the way in which drinking water is being used across the southeast has changed considerably,” he wrote to customers. “The rise of working from home has increased drinking water demand in commuter towns by around 20 per cent over a very short period, testing our existing infrastructure.”

Hinton, who has been paid bonuses worth more than £350,000 in the past two years on top of more than £520,000 in basic salary, also blamed a recent hot spell and low rainfall since April, which he said had boosted demand for tap water, in part because gardener’s rain butts had been depleted.

“Our reservoir and aquifer stocks of raw water, essential to our water supply but not ready to be used, are in a good position. However, demand for treated mains water, which takes time to process and deliver, was greater than we could meet,” he said.

“Over the past week we have needed to find water to supply the equivalent of an additional four towns the size of Maidstone or Eastbourne, every day.”

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Greg Clark, the Conservative MP for Tunbridge Wells, said: “Their only job is to deliver drinking water. But in my constituency they have run out of water twice in six months — once just before Christmas when we had a cold snap, and now after a small and unexceptional heatwave.”

He added: “What they’re describing in terms of people working for home is by no means specific to this area … There has been for some time a tendency for people to work more from home. A water company should be able to predict and accommodate for this.”

Ofwat, the water regulator, has rebuked the company for repeatedly failing to keep customers supplied. “South East Water must do better to predict and manage operational issues, help customers, and engage with them on what is happening and why. Customers will be asking why, for the second time in six months, their water company is being caught out by the weather,” a spokeswoman for Ofwat said.

The Times

Read Utility Week’s coverage of the letter here.

Rules on pollution blocking housebuilding, says minister

Pollution rules are a major obstacle to the government’s aim of 300,000 new homes a year, a minister has said.

Wastewater and sewage from new homes and construction sites raise levels of nutrients like nitrates and phosphates, which harm water quality and wildlife.

Baroness Scott of Bybrook said a duty to lessen the impact was placing a “significant burden” on housebuilders.

Housing development had been stalled in 27 areas covering 14% of England, she told the House of Lords.

The Home Builders Federation (HBF) says the rules are disproportionate and will mean up to 41,000 fewer homes a year.

It argues the root causes of the nutrient problem are water companies’ dumping of raw sewage into rivers and wastewater from farms.

It also takes issue with a working assumption by government environmental agency Natural England that each new home will increase the population by an average of 2.4 persons, insisting most new housing caters for the existing population in the local area.

Natural England lays down regulations for local planning authorities to ensure housebuilding achieves “nutrient neutrality”.

This means that developments do not result in a net increase in nutrients which can damage habitats, estuaries and wildlife.

To meet this condition, Natural England says extra nutrients created by additional wastewater need to be mitigated.

In total, 74 planning authorities have been advised that, where protected sites are “in unfavourable condition due to excess nutrients”, development should go ahead only if additional pollution is not caused.

In these areas, the Local Government Association says the rules have had a “significant negative impact” on the number of homes granted planning permission.

In a written answer in the Lords, Baroness Scott, a junior minister in the Department for Levelling Up, Housing and Communities (DLUHC), said the government recognised the need to protect freshwater habitats and rivers, and was tackling “underlying pollution”.

But nutrient neutrality had placed a significant burden on housebuilders “despite the limited impact extra wastewater from residents in new developments has on waterbodies”, she added.

Natural England’s advice to 74 local planning authorities had “effectively stalled housing development in these areas given the lack of available mitigation schemes, creating a major barrier to the government’s ambition of delivering 300,000 homes per year by the mid-2020s”, she said.

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Natural England told the BBC that, rather than blocking new homes, it was working with developers and planning authorities to ensure that pollution levels were not increased.

“Our advice is helping developers put in place mitigation such as the creation of wetlands, which benefit people and nature,” it said.

BBC

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.