Utility Week

Uberflip 15 11 13

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Finance & Investment This week Regulator says charging plan would have driven up wholesale prices at 'significant' cost to users Ofgem balks at cost of balancing proposal Energy regulator Ofgem has rejected an industry proposal for changes to market rules that would have sharpened UK generators' competitiveness in Europe and boosted profits – but would have added £2.50 a year to consumer bills. Ofgem acknowledged that the Generators: BSUoS costs split 50:50 proposal addressed the fact that UK generators were at a disadvantage compared with most of their European rivals because they had to contribute to network balancing costs. But the regulator said subsequent increases in wholesale prices could result in "a significant cost to all GB consumers", estimated at up to £250 million a year. National Grid had proposed an end to the equal split of balancing services use of system (BSUoS) charges between generators and suppliers to align with the rest of Europe where suppliers usually paid most or all of the charge. Ofgem said the proposal would boost power exports and so increase UK wholesale prices as more marginal plant was deployed. National Grid argued that other, lower BSUoS charges paid by European generators gave them a competitive advantage. The cost in the UK is currently split equally between generators and suppliers. National Grid's proposal was for suppliers to meet the full cost. During consultation nearly all UK energy companies with generation interests supported the proposal. Consumer groups and small suppliers foresaw a threat to competition in the need for suppliers to hold greater credit cover. TL Stock watch Water Government scrutiny of bills 'unwarranted' Deutsche Bank has said that increasing scrutiny of consumer bills is "not positive" for the water sector. Responding to environment secretary Owen Paterson's letter to water companies asking them to ensure customers get a fair deal, the financial services company said the level of government scrutiny was unwarranted. In its report, Deutsche Bank said rising energy bills had attracted intense debate but water bills had risen at a much slower pace. However, it said, "the water sector appears to be attracting slightly more attention from government". According to the report, the lasting impact on the sector will depend on the outcome of the 2014 price review, and if affordability of utility bills remained a prominent political concern through 2014 Ofwat could deliver a tough review. Electricity Guaranteed buyer for green generators The government has unveiled plans to set up a guaranteed buyer for the output of small renewable generators. The move was an amendment to the Energy Bill that seeks to redress the loss of surety to independent Centrica share price, 13 October - 11 November Centrica share price, June - November 500 370 Centrica shares hit a five-month low at the end of October amid fears that the group – parent company to British Gas – had suffered a slowdown in earnings growth. Credit Suisse predicted that the group would deliver just 5 per cent earnings per share in 2014/15. Centrica was due to report its results as Utility Week went to press. green generators under Electricity Market Reform (EMR). The Department of Energy and Climate Change confirmed plans to establish an offtaker of last resort for prospective solar generators and other independent renewable power producers that might struggle to find a counterparty to long-term power purchase agreements. Such deals are essential to ensure generators receive a decent price for their output and can secure debt and equity finance for their projects. The decision to introduce an offtake backstop was sparked by concerns that the contract for differences (CfD) scheme under ERM could leave generators that did not have a supply business struggling to secure a customer for their power. CfDs, unlike the Renewables Obligation they will replace, put no obligation on suppliers to take a prescribed quantity of renewably produced electricity. Energy minister Greg Barker said the last resort measure would "allow new smaller players to get a greater share of the renewable energy market". A spokeswoman for the Solar Trade Association welcomed the move but warned that the government had tabled the amendment without consulting the industry. She said: "Any solution must work and establish the confidence and buy-in of the industry." 400 365 390 360 380 355 370 350 360 350 Date 13 Oct 22 Oct 31 Oct 11 Nov Date Jun Jul Aug Sept Oct Nov UTILITY WEEK | 15th - 21st November 2013 2013 | 19

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