Utility Week

UTILITY WEEK | NOVEMBER 2022 | 9 Policy & regulation However, as Labour increasingly assumes the role of government-in-waiting, the blank spaces in its plan will need to be lled in, says Buckland: "Until it's more de ned, it's pretty di• cult to see exactly the role that plays and the gap that it lls in the energy system. The real challenge for Labour over the next 18 months is to take their headline commitments and start to put more meat on the bone." Conservatives Just two months ago, Kwasi Kwarteng made the switch from Secretary of State for Busi- ness, Energy & Industrial Strategy (BEIS) to chancellor, the second most senior job in government. However, only Ted Heath's chancellor Iain MacLeod, who died exactly a month aŒ er being appointed, has had a shorter time in the job than Kwarteng, who is once again on the backbenches. While the ex-chancellor's wider reputa- tion has been shredded since he entered No 11 Downing Street, at least he had a sound grasp of the sector's needs aŒ er his time as energy minister and then secretary of state at the BEIS department. "Kwasi understood how the energy mar- kets and the energy industry worked, so it's a real shame he's gone," says one energy executive. The government's Energy Price Guarantee is being scaled back by his successor, Jeremy Hunt, who has announced a Treasury-led review of whether the support package can be better targeted. However, the government's move to cap the revenues of low-carbon generators has sparked consternation among utilities. The proposed "Cost-Plus Revenue Limit", which was being rushed on to the statute book while this edition of Utility Week was going to press, is a less "straightforward" mechanism than just extending its levy on oil and gas producers' windfall pro ts, says Buckland, who is now a director at public a— airs company Flint Global. The government will have to be care- ful, when framing the revenue cap, to take into account generators' existing forward hedge positions and how it will vary across the di— erent parts of the sector, Buckland says: "You don't want it to apply to say, pumped hydro, which plays a critical role in demand." O— the record, energy companies have been spitting feathers about the sweeping nature of the powers that the bill gives the government. The utility executive describes the bill as an "absolutely astonishing" "power grab". The bill is receiving very little scru- tiny because it is being rushed through Par- liament in less than a week to put support mechanisms for businesses and households on a statutory footing. It also lacks so-called sunset clauses, which would set expiration dates for the powers it gives government. Emma Pinchbeck, chief executive of Energy UK, described the government's deci- sion to award itself these open-ended powers in the legislation as "troubling". In her keynote speech at the trade body's annual conference in London on the day the bill was published, she said: "We need to be careful that we don't end up with short-term measures or undermine the UK's reputation for stability and deter the investment we need for the next decades." While the government may be motivated by a desire to keep its options open in a very volatile environment, taking on these powers is the "completely wrong signal to send" to investors, says McNally. "Investors are just going to down tools until they've got clarity on what the powers are actually and the price that's going to be set. At a time when we don't need a hiatus on investment, the government has taken action to encourage precisely that," he says. In addition, McNally points out, the rev- enue cap skews investments incentives away from renewables towards gas and oil. While the Energy Pro ts Levy on gas and oil con- tains an allowance for investment, there is no such provision in the revenueœcap. "In a crisis that has been created by gas, it's unbelievably wrong and unfair," says the utility executive. Darren Jones, chair of the BEIS committee of MPs, echoed these concerns in a letter to business and energy secretary Jacob Rees- Mogg on the day before the bill was due to be debated in the Commons. "Incentivising future drilling for gas, while not incentivising the installation of renewable technologies seems to be at odds with the government's intention to reduce our dependency on fossil fuels,' he wrote. On top of this, the government has said it wants to relax planning rules on onshore wind while making noises to curb develop- ment of solar farms on agricultural land. Simon Maine, managing director of corpo- rate communications at Brook eld, told Energy UK's annual conference that these mixed messages are giving investors "whip- lash". They're not the only ones. Water While energy utilities may feel pretty bruised aŒ er the last month, their counterparts in the water sector will be feeling even more thor- oughly beaten up aŒ er the party conference season. Following a summer when news about sewage outfalls and water shortages com- peted for headlines, both major parties had the sector in their sights. In his keynote speech at the Labour con- ference, shadow environment secretary Jim McMahon pledged to strike o— water com- pany directors who "routinely and systemati- cally break" rules and ensure illegal activity is "punished". He said: "Being a custodian of water and the environment will be a duty again. The institutions intended to hold them account- able are weakened and toothless as water bosses laugh all the way to the bank." McMahon said Labour would also deliver mandatory monitoring of all sewage outlets in a bid to help to deliver a legally binding target to end 90% of sewage discharges by 2030. This goal would be backed by auto- matic nes for discharges with failures to make improvements paid for out of divi- dends rather than customers' bills. At the Tory conference, the party's dereg- ulatory wing was in the ascendant, albeit temporarily. However, recently appointed environment secretary Ranil Jayawardena struck a more interventionist tone on water, observing that "government must step in if there is market failure". Noting that "water companies have a lot to answer for", he con rmed that he would be taking forward plans to liŒ the cap on Environment Agency ne for breaches of its rules up to £250 million from the current level of £250,000 (see analysis, p16). David Blackman, policy correspondent IN? Sir Keir Starmer, Labour leader

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