Utility Week

UTILITY Week 19th May 2017

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6 | 19TH - 25TH MAY 2017 | UTILITY WEEK People & Opinion Price cap would be counter-productive Forget about the price cap, it's a coherent energy strategy we need to be talking about. View from the top Phil Foster, managing director, Love Energy Savings T heresa May's soundbite of choice throughout the run- up to the general election has been "strong and stable", but the Conservatives' proposed price cap is symptomatic of how the UK's energy policy is any- thing but. While focusing on a price cap appears to be an effective vote- winning tactic, it serves to draw crucial attention away from the real issue, which is the lack of a robust and coherent energy policy going forward. Looking at the long-term future of the UK energy sector, the proposed price cap feels counter- productive for two reasons. Firstly, while a price cap would potentially benefit those households that have been rolled over onto a more expensive tar- iff, it also means that to make up the shortfall, suppliers are likely to increase the prices of their cheaper deals. As a result, those households that take the time to shop around for a better deal by switching supplier may well be penalised. Secondly, it provides some- thing of a false sense of secu- rity for consumers, who assume that, as they are protected by a 'price cap', they do not need to worry about finding a cheaper deal elsewhere. In truth, if you are benefiting from the price cap then you are already paying too much for your gas and electri- city, and would be better served by switching supplier than you would be relying on the price cap to lower your bills. Rather than pandering to voters with a policy that sounds good on paper but offers lit- tle real substance, instead the government urgently needs to address issues that persist con- cerning our ongoing security of supply. Last winter, spare capa- city margin, the buffer between peak demand and available capacity, fell to around 1.2 per cent – the lowest level for a dec- ade. This coming winter it could well fall even further, with a variety of factors meaning that disruption to supply, or signifi- cantly increased costs, are a very real possibility. April of this year saw the first day without coal contributing to our energy mix since the Indus- trial Revolution. While this in many ways is to be applauded, clearly demonstrating a move away from the most polluting generation option currently used, the impact on our overall energy mix is less rosy. We now rely on gas-fired generation for 47 per cent of our energy on average – a fig- ure that climbs significantly higher during periods of peak demand or when other genera- tion technologies struggle. When weather conditions mean that renewable technologies under- perform, for example, the bur- den on gas to pick up the slack increases. Oen, peak electricity demand coincides with periods of cold weather, where gas is also required for heating, further exacerbating this issue. This winter, our reliance on gas will be particularly tested. A lack of investment in the North Sea aer the crash in oil prices in 2014 means we are not self- sufficient in terms of our gas supplies, and instead are reli- ant on imported supplies from Norway, France and the Nether- lands. This leaves us vulnerable to price rises, as well as meaning that supply issues in those coun- tries and elsewhere in Europe result in higher prices for us. Last winter, outages at EDF's nuclear power plants across France resulted in substantially higher prices for both electricity and gas here in the UK. This is an extract from a column on the Utility Week web- site. To read the full article, visit: http://bit.ly/2pMVBSU. See more on the price cap in Utility Week Lobby, p10 "Mental health is no longer a taboo subject and we're keen to keep staff updated and informed about how they can support customers living with mental ill health, as well as their colleagues, friends or family members." Sue Lindsay, director of customer policy and engagement, Wessex Water

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