Utility Week

UTILITY Week 27th June 2014

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6 | 27th June - 3rd July 2014 | utIlIty WeeK Comment T he energy sector is under greater scru- tiny than ever before. Everyone from our customers to our politicians wants to see greater transparency from energy com- panies in all that they do. Far from being worried by this, my com- pany SSE is fully supportive of anything that helps restore trust in the energy market. That's why SSE has just published the results of its first ever economic impact study – carried out independently by accountancy firm PwC. It's an attempt to evaluate the impact SSE makes at a local and national level through its UK operations. That report tells us that SSE boosted the UK economy by £9.1 billion in 2012/13, com- parable in scale with the one-off £9.9 billion boost that the London Olympics gave the UK economy in 2012. It also showed the importance of the supply chain, as we now know that SSE's activities support 112,000 jobs in the UK. That means that for every person directly Lighting the way Everyone should welcome the spotlight that greater transparency brings – even energy companies. Those with nothing to hide have nothing to fear, and it will help rebuild consumer trust. Chief executive's view Alistair Phillips-Davies, SSE In the House Jonathan Reynolds MP Eco is not fit for purpose Changes to Eco have weakened an already feeble government programme. A t the Labour Party conference last year, Ed Miliband announced Labour's plans to radically reform the energy market, ring-fencing generation from supply, replacing the regulator, and freezing energy prices while we do it. These reforms will bring much-needed transparency and downward pressure on prices to the market, but we are acutely aware that an ambitious energy efficiency programme is also needed. Britain's inefficient housing stock is a serious problem, and the Energy Compa- nies Obligation (Eco), alongside the Green Deal, was the current government's attempt to address it. From the outset, we thought it lacked ambition. In practice, the impact of Eco has been even more limited still. A major problem is the appalling level of bureaucracy involved. The paper trail for each measure installed is breathtaking. I know of heating companies in my constitu- ency who now employ more administration employed by SSE a further 4.8 jobs in the wider economy are supported. Transparency clearly stretches to other areas of business operation, such as tax and profits. Energy firms need to show they are acting responsibly and paying their way. The PwC report looked into this area too, and found that our tax contribution was around £536 million in financial year 2013. Last month we announced our price freeze for household bills, but the more observant of you may have noticed that, subject to securing the necessary third party consents, SSE will reorganise its companies so that there are separate legal entities for energy supply (retail) and its electricity gen- eration and energy portfolio management (wholesale) activities. This legal separation will enhance the transparency of how SSE measures and reports the profits and performance of these businesses. I think transparency is even more impor- tant when it comes to costs. SSE has been very clear that we have frozen our prices until 2016, but also very clear that we are doing this against a backdrop of rising costs, outside of "traditional" wholesale energy costs. Guaranteeing customers no price rises until at least 2016 means absorbing rising costs of both low-carbon subsidy and smart metering, while also taking significant risk on wholesale price volatility. We have had to be transparent about that with investors also. Greater transparency will sharpen minds and help everyone focus on the bigger pic- ture, which is trust. Sometimes the results will be positive and sometimes they won't, but the direction of travel is the right one. It will allow policymakers to see how much policies really do cost as they move from the statute book to the energy bill and companies to measure and improve the con- tribution they can make to society. That can only be a good thing. staff than they do engineers, such are the burdens Eco has placed on them. Things became worse in the Chancellor's Autumn Statement last year. In response to the prime minister's comments that lev- ies such as Eco constituted "green crap", the government announced that Eco would be fundamentally redesigned, with the car- bon target reduced and qualifying measures changed from high cost to low cost. The new qualifying measures include lo and cavity wall insulation, despite these being the very items that the Green Deal pay-as-you-save- scheme was designed to fund. The result is a dysfunctional policy landscape no longer fit for purpose. Some good Eco schemes have imple- mented, but these are now finished. The challenge for us is to offer an effective fuel poverty policy that works coherently with a pay-as-you-save scheme, in order to cut car- bon and reduce energy bills. Jonathan Reynolds MP, shadow minister for energy and climate change

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