Utility Week

Utility Week 25th October

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Page 12 of 31

Policy & Regulation This week The government claims Eco's initial cost estimates are on track, despite industry claims Suppliers and Decc at odds over Eco costs As energy bills continue to dominate national headlines, the big suppliers have taken issue with government figures showing the cost of delivering the Energy Company Obligation (Eco) in line with the initial £1.3 billion estimate. One supplier told Utility Week Energy efficiency initiative: in hot water? that the market-wide cost of delivering Eco could "be in excess of £2 billion a year", with the costs of installing energy efficiency measures likely to ramp up as the scheme progressed. The supplier claimed this could add up to £83 a year to the average consumer energy bill. This is significantly higher than figures published by the Department of Energy and Climate Change (Decc) this week, predicting an annual market-wide average cost of £1.336 billion a year for the scheme, which would add an average of £47 a year to bills. Decc said it had based its estimate on figures provided by the major energy companies. British Gas and SSE, which partly blamed their recent bill increases of 9.2 per cent and 8.2 per cent, respectively, on meeting government obligations, both repeated their call for Decc to extend the Eco deadline, saying that would cut costs. Npower has abandoned its call for a £1.3 billion spending cap on Eco, asking instead that Decc publish monthly delivery costs that can be tracked, and "appropriate action" taken if they increase. A Decc spokesman said the costs of Eco were "broadly in line with the costs of previous schemes". Energy Fixed term tariffs cannot be changed Energy companies have been banned from increasing the prices on fixed term tariffs under the latest Retail Market Review reforms which came into force on Tuesday. Ofgem has introduced the changes to fixed term deals, which ban suppliers from increasing the amount customers pay, or making any other changes to fixed term tariffs "which are to the disadvantage of a customer". This new rule affects all fixed terms contracts entered into on or after 15 July this year. The regulator has also banned suppliers from automatically rolling customers from one deal onto another fixed terms deal. Suppliers will have to place consumers coming out of fixed term deals onto their lowest price tariff from 31 March 2014. Energy Miliband quizzed on price freeze policy Energy secretary Ed Davey has questioned Ed Miliband about Labour's proposed energy price freeze in a letter. Davey said the price freeze would be "detrimental to consumers and businesses" and would lead to higher prices. He added that the policy would hit smallest suppliers hardest, undermine investment in new power stations and "halt home-grown green energy". The energy secretary asked Miliband how he would prevent price hikes before the general election and after the 20-month freeze, how the freeze "would damage competition", and what Labour thinks is an appropriate profit margin for supply and generation businesses. Energy SNP to transfer green levies to general tax The Scottish National Party (SNP) would remove green and social levies from energy bills and meet those costs through general taxation in an independent Scotland. Speaking at the SNP party conference in Perth, deputy first leader Nicola Sturgeon said removing levies would cut bills for Scottish consumers by 5 per cent – or £70 per year. She said if Scotland votes for independence next year, government would spend £200 million tackling fuel poverty directly. Sturgeon said the current system, under which £80 million is collected through taxes and £120 million collected through levies on energy bills "doesn't take account of Scottish priorities and it's not as efficient as it could be". Political Agenda Mathew Beech Almost five years since EDF first set out its plans to build four new nuclear power stations in the UK, energy secretary Ed Davey finally announced this week that a "broad commercial agreement" for Hinkley Point C had been reached. Davey triumphantly told MPs that the deal vindicated the work of his department. "This announcement also represents a significant vote of confidence in our reforms," he said. The price, £92.50/MWh, "Labour will scrutinise detail of nuclear deal" which could fall to £89.50/MWh if EDF proceed with Sizewell C, was also called a success by Davey. "We have got the figure under £90, and I do not think that anyone thought that we would do that," he said. "We have got a good figure through hard, tough negotiations." Labour, which agrees the UK needs new nuclear, welcomed the deal but said it would "look in detail" at the agreement. Shadow energy minister Tom Greatrex accused the government of hypocrisy for criticising Ed Miliband's promise to fix energy prices for 20 months while setting energy prices for nuclear for 35 years. Davey said this claim demonstrated Labour's "economic illiteracy", adding that "even if a part of the electricity generation mix has a fixed price, most generating costs remain variable and will be for some time". In a buoyant mood after announcing the first new nuclear plant in the UK since 1995, he had one last swipe at Miliband's price promise, saying "this is bad news for consumers, bad news for competition and bad news for investment". UTILITY WEEK | 25th - 31st October 2013 | 13

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