Utility Week

Policy & Regulation This week Freeze mooted for tax that 'pushes up prices but fails to encourage low-carbon investment' Carbon floor price 'to be frozen from 2016' Government is set to freeze the carbon floor price from 2016 in a bid to keep prices down and appease heavy emitters, according to The Mail on Sunday. "Whitehall sources" told the newspaper the Treasury was Coal-fired plants are being driven to close early preparing to halt the rise of the green tax. It adds £5 to the cost of emitting a tonne of carbon dioxide, rising to £18 in 2015/16. Coal producers were due to lobby for the freeze in a meeting with energy minister Michael Fallon on Monday. "It penalises the use of cheap coal by doubling the taxation of coal year on year," said Phil Garner, director general of Coalpro. "This is driving the early closure of existing coal-fired power stations, putting UK energy security at risk and driving up energy bills without encouraging investment in low-carbon technology or impacting global emission levels." The Treasury has previously resisted calls to scrap the tax, which is expected to haul in £2 billion in 2015/16. Critics including major energy users, utility bosses, consumer watchdogs and even environmental groups, say the floor price pushes up prices for customers while failing to incentivise low-carbon investment. Its status as a tax means it is more easily reversed than a subsidy contract, making it an unreliable basis for investment. What's more, the levy acts as a surcharge on the European carbon price, which is chronically depressed. That means UK industry pays more for pollution than its rivals on the Continent, putting it at a competitive disadvantage without necessarily saving carbon overall. MD EnErgY Price freeze would threaten small firms Competition in the energy market will be at risk if independent suppliers are forced to freeze their tariffs for 20 months, according to new research. Independent consultancy Cornwall Energy has predicted that any potential price freeze would "jeopardise" the growth of smaller suppliers, which have a 5 per cent market share. The study said that a tariff freeze would prevent smaller suppliers from passing on any increasing costs to their customers, and because they are smaller companies, they could not take the financial hit. To manage the increased costs, the report said the suppliers would have to add a minimum of £60 (5 per cent) to dual fuel bills before the price freeze. The increase could be as high as £80 (6 per cent) because suppliers could add a "risk premium" to hedge against unexpected volatility in the wholesale markets. WaTEr Bulk supply dispute framework revealed Regulator Ofwat has set out the framework it will use to resolve pricing disputes involving bulk supplies. A bulk supply is the supply of water or the provision of sewerage services from one appointed water company to another, or to high usage non-household customers. Companies can draw up a contract between them, known as a 'bulk supply agreement' that sets out the terms and conditions of a bulk supply. Under the Water Industry Act 1991, if companies fail to reach agreement on a bulk supply, they can ask Ofwat to make a decision on the price and other terms that should apply. WaTEr Minister to appear at privatisation event Water minister Dan Rogerson will appear at an event to mark the 25th anniversary of the privatisation of the water sector. Rogerson will join Ofwat chair Jonson Cox; former regulator Ian Byatt; Lord Moynihan, minister in charge of water privatisation in 1989; and Wessex Water's Colin Skellett, the longest-serving chief executive in the sector, in the discussion at the Sustainability Live exhibition in Birmingham on April 2. Utility Week editor Ellen Bennett said: "This will be a great opportunity to look at the changing nature of the water sector and the regulation of water companies since 1989." For more information and to book your place at Sustainability Live see sustainabilitylive.com Political Agenda Mathew Beech Labour's "cost of living crisis" crusade continued as backbencher Fiona O'Donnell secured her first adjournment debate. The East Lothian MP took the opportunity to debate what is being done to help consumers facing a doubly difficult time – the fuel poor paying via prepayment meters. O'Donnell forged the link between those struggling to pay for energy via prepay meters, and the other "cost of living crisis" villain – payday lenders. "Those least able to pay are trapped with prepay meters" "As poverty and the cold bite across the UK, some will be driven into the jaws of those highcost, under-regulated lenders to pay their energy bills," she said. She claimed those least able to pay their energy bills are trapped with prepay meters and a higher than average energy bill, exacerbating their poverty. Climate change minister Greg Barker admitted "there is undoubtedly a lot more to do on the problem", but warned there are "finite resources" available to deal with the issue. He added: "We have made progress in recent years, but not nearly enough to be in any way confident that the problem is being defeated." But far from dismissing O'Donnell's case with the familiar rhetoric about the cuts that have to be made due to the deficit they inherited from Labour, Barker was keen to open cross-party discussions. He said he would "happily consider in more detail, face to face, the questions that she has raised". When both parties are quick to accuse the other in the energy blame game, it is refreshing to see some MPs are still open to trying to solve a problem together. UTILITY WEEK | 31sT JanUarY - 6Th FEbrUarY 2014 | 15

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