Utility Week

Utility Week 1st November 2013

Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government

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Page 12 of 31

Policy & Regulation This week Last-ditch attempt to get a 2030 emissions target into the Energy Bill fails in the Lords No decarbonisation target for Energy Bill A 2030 decarbonisation target will not be set before the next general election, after a lastditch attempt to get it in the Energy Bill failed on Monday. The House of Lords defeated by 216 votes to 202 an amendment to make the government Generation: target could have been 'very costly' set a cap on 2030 power sector emissions before 1 April 2014. The Energy Bill as it stands says such a target "may" be introduced in 2016, when the Committee on Climate Change advises on the fifth carbon budget, covering 2028-32. The news will come as a blow to a broad coalition of industry, investor and environmental groups who campaigned for the target. They said it was needed to promote confidence in green investment that had been damaged by mixed messages from the government. Labour peer Baroness Worthington, who proposed the amendment alongside cross-benchers Lord Oxburgh and Lord Stern, argued that it was a "moderate" step to address a "lack of purpose" in the Energy Bill. "Despite the fact that we have been deliberating this Bill for many months and in fact years, investors are still not sure what this Bill delivers," she said. Closing a three-hour debate dominated by discussion of the validity of climate science, Worthington said: "The most dynamic economies in the world… are all accepting that the only future for the world is clean energy." Baroness Verma, the government's spokeswoman in the Lords, said the amendment could saddle the UK with an "unrealistic and very costly target". MD Water Ofwat consults on clawing 'gains' back from Thames Water Having blocked Thames Water's bid to raise prices, Ofwat this week launched a consultation to assess whether it could deduct gains from the water company through the "substantial favourable effect" mechanism. The regulator said it would look at the extent to which the company had benefited from "wider economic circumstances beyond its control". According to Ofwat, Thames could have benefited from the reduced representativeness of RPI during the recession, "due to formula effects which could have resulted in significant net financial benefit". This would mean Thames enjoyed higher revenues without offsetting changes in costs in the wider economy. It could also have enjoyed a lower cost of finance than assumed by Ofwat when prices were set. Thames Water is appealing Ofwat's rejection of its bid to raise household bills by 8 per cent in 2014/15. Electricity 'Keep green levies in energy bills' More than 50 organisations operating in the built environment have issued a warning to the prime minister not to scale back green levies on energy bills. In a letter to David Cameron co-ordinated by the UK Green Building Council, chief executives from companies including Eon, Carillion, Barratt, Willmott Dixon and Keepmoat urged the government not to scale back schemes such as the Energy Company Obligation (Eco). The warning follows Cameron's statement to Parliament that "we need to roll back some of the green regulations and charges that are putting up bills". The letter said energy efficiency was the "only sure way" to protect households against rising bills in the long term, and that rolling back Eco, which is designed to improve the energy efficiency of vulnerable and lowincome households and hard to treat properties, would instead increase energy bills for these consumers and have "severe consequences" for jobs in the sector. The organisations also urged Cameron to consider using additional incentives such as Stamp Duty to encourage uptake of the Green Deal, which could help reduce the cost of Eco. Paul King, chief executive of the UK Green Building Council, said: "Business leaders are sending a powerful message to David Cameron – do not scrap the Energy Company Obligation." Political Agenda Mathew Beech Energy secretary Ed Davey met his European counterparts this week with the goal of establishing an ambitious EU 2030 energy and climate policy. Davey said this target was necessary to tackle climate change, because "only then will investors have the confidence to put the billions into low carbon that we need". However, Davey has seen the Energy Bill leave the House of Commons for the House of Lords with no definitive pledge "An emission target can be set from 2016" for a 2030 decarbonisation target, although the Bill allows the energy secretary to set a d ecarbonisation target in 2016. Proponents of a 2030 d ecarbonisation target said it needed to be set by 1 April 2014 to provide certainty for investors. The latest attempt to get the decision brought forward failed, with peers voting 216 to 202 against (see story above). Lord Oxburgh, who jointly tabled the amendment, said: "Investors have the choice of where to put their funds and they will not put their money into a decarbonised energy infrastructure unless they see the government committed not just by good intentions, but by the wording of the Bill." However, the government's argument is that by 2016 there will be a greater understanding of the technologies available to help the UK to decarbonise, while there are also other ways of encouraging investment. Ministers will argue they are being pragmatic, and by waiting until 2016, the best value for money route towards decarbonisation is being taken. UTILITY WEEK | 1st - 7th November 2013 | 13

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