Utilities Review, October to early November 2016
Continuing our update on the UK utilities
market, covering the latest in the electricity,
gas, renewable energy and water industries…
Prices Up! Price down!
Through October the upwards trend continued but in November we have seen a softening. The fundamentals behind this seem a little unclear and suggest that the previous prices had a lot of sentiment built in. This could be the case, as some of the increases was due to speculation by traders on the back of a weak £. As the £ has strengthened then traders would have cashed their options in to capitalise on the currency gain and push price back down again. Also, though weather has been cold the system has generally been well supplied suggesting again that anxiety over colder weather forecasts has driven prices not fundamentals.
Further out on the curve as we might expect there is greater stability and the increases in the shorter term prices is resulting in some backwardation (where prices for the future are cheaper). This should give value to longer term deals. It would therefore be worth considering these on the basis that if the oil producing countries ever do get their act together on capping oil production or if the global economy picks up then this will push prices further.
Black start decision impacts pass-through contracts
Having just promoted the benefits of pass-through contracts, a recent decision by Ofgem to not fully subsidise so called Black Start contracts will result in an increase in BSUOS charges for those on these contracts. Black start is where a powerstation can start generating without a boost from the National Grid. The decision not tom award the number of contracts that National Grid requested means they will have to recover the costs via Balancing Use of System charges.Whilst this will impact all customers eventually as these costs will be built into new non pass through contracts, those on pass through will see a more immediate impact.
Centrica set to slash 560 British Gas staff and drop green project as Conn cuts costs
Centrica is axing 560 jobs at British Gas and shutting down a major green energy business as part of £3 million-a-year “efficiency programme”. Most of the affected are back-office staff and managers in customer and field operations, as well as British Gas’s UK Home division
Source : The Standard
Smart Meter roll-out suffers further delay
The full smart meter roll-out has been hit with a further delay, as the smart meter network operator missed its deadline for go-live. The Data and Communications Company (DCC) was due to go live on September 30, after a number of delays since its initial date in December 2015.
Source : BDC Magazine
Yu Energy news
YU’s current customer terms (October 2016 Clause M2) state that this supplier will not accept any communication from TPI’s on a customer’s behalf. The UIA are taking this up with YU to understand the exact meaning behind this.
An energy first as UK successfully transmits data via national electricity grid
Data has been transmitted across a national electricity grid for the first time, in what could be a significant step towards the creation of virtual power stations aka the Smart Grid, where many thousands of homes and businesses combine to manage electricity use more smartly. This will be an integral part of future Demand Side Management solutions for the country.
Source : The Guardian
Calls to future proof our energy system
Our energy transmission and distribution charging arrangements are not fit for purpose according to Energy UK, who are calling for an overhaul of the existing regime to reflect the changes in the energy sector. Currently the costs of operating the grid are recouped through TNUoS charges, but the increase in popularity of generation that is not directly connected to the transmission system (in all its various guises) means that the costs of running the grid are being pooled across a decreasing number of customers.
FiT pressure builds as industry records slowest month yet under new regime
Pressure is being brought to bear on the Department of Business Energy and Industry (BEIS) to reform the feed-in tariff. This follows reports that August was the slowest month of solar deployment under the new regime. The Renewable Energy Association has pointed out that solar deployment in August 2016 is one third of what is was in 2015.
Source: The solar power portal
Feed-in Tariff (FIT): Generation & Export Payment Rate Table
Below is a link to the document which outlines tariff rates for the Feed-in Tariff scheme for FIT installations of all technologies for the period 01 October – 31 December 2016. Click here
Britain’s biomass generation carries big emissions risk, report claims
A new economic analysis has claimed that biomass power could be causing more carbon pollution than burning coal or natural gas. Burning wood for electricity emits around 40% more carbon pollution than burning coal to produce an equivalent amount of energy, the NRDC reports,… The industry has hit back, claiming it is “distorting the facts”. Click here
Ecotricity announces winter price hike
Green energy specialist says government policy and cost increases from grid operators have forced it to up its prices for first time in four years.. The independent green energy supplier said on Monday electricity prices for its customers will rise by 7.8 per cent and gas prices increase by 3.8 per cent from November 14. Click here
Ofwat: TPI Code of Conduct for Water
The UIA attended an event with other TPI’s, industry bodies and Ofwat. The aspiration to avoid the water industry following the same steps as energy.
Ofwat like Ofgem, have no regulatory powers over TPI’s, but unlike their energy counterpart, they have no powers to enforce Best Practice for Misleading Marketing Regulations so have even less teeth to grapple with rogue practices. Retailers are reluctant to take on the additional responsibility of monitoring Tpi compliance under their water supply licence agreement as it would be expensive for them to establish compliance teams to monitor TPI performance.
There was a real sentiment to see decisive action being taken. Ofwat were charged with being “naïve” to not regulate by some representatives alongside concerns that customers are already being hassled by TPI’s. Existing codes of practice were discussed, and indeed The UIA got a mention, but there was a viewpoint that no TPI would sign up if a code was voluntary unless strongly incentivised to do so.
So after all that debate and discussion, Ofwat announced their minded to position which is to set up the code principles and encourage/leave the industry to create their own or use existing accreditation schemes.Given the weakness of Ofgem on this matter, it appears water will be no different – every man and business for themselves.
Invicta to enter water market as “Water Choice South East”
Invicta Water has applied to Ofwat for a water supply and sewerage licence, which would enable it to participate in the English retail market when it opens next year.… This brings the total number of companies to have applied for licences to 18, since Ofwat opened the process. The regulator has predicted as many as 40 new applications in the coming year. Ofwat has published proposals for setting licence fees for the new water and sewerage supply licensees from April 2017 after the opening of the market. It said the costs of regulating the WSSL regime are uncertain and are likely to be higher than the previous water supply licensing regime. Click here
CMA : Competition and Market Authority
The CMA have announced that they have launched a 12 month study into digital comparison tools, switching sites. It will major on Domestic areas
Ofgem shelve TPI Code of Practice (CoP) work again!
A recent communication from Ofgem indicated that work on the TPI CoP has stopped for the time being owing to no remedy on this code featuring in the CMA report and there is a substantial work load emanating from the CMA remedies.
CMA Energy Market Investigation remedies – next step towards implementing zonal transmission losses charges
The Competition and Markets Authority are undertaking a consultation exercise to introduce geographical charging for Transmission Losses. The costs for losses are recovered via BSUoS charges between generators.
This is likely to mean organisations further away from sources of generation will see increased costs. The scheduled date for implementation is April 2018. Once again customers on pass through may be the first to feel the change.
CMA Energy Market Investigation: market remedies rollout – Changes around micro business
The CMA have issued formal consultations on draft energy market remedies. Those which are pertinent to TPI’s are those concerning micro business consumers. The CMA have defined a new sub category within MBC with lower consumption thresholds and intend to make changes around termination and rollover clauses within the supplier licence agreements.
It is important to note that the CMA make a distinction between a micro business customer and what they describe as a small non- domestic consumer who is then referred to as “Relevant Micro Business Consumer”.
New licence condition SLC7D defines the criteria for Relevant Micro Business Consumer as consuming less than or equal to 50,000 KWh for electricity within profiles 01 to 04, and less than or equal to 73,000 KWh for gas.
Consumers who fall within that category are entitled to receive relevant price control information for the attainment of quotes promptly on the supplier’s website or through an authorised third party platform.
All other remedies within this paper cover the whole of MBC which under SLC7A is defined as <100,000 kWh electricity and <293,000 KWh for gas. In brief:
- suppliers must publish their deemed and out of contract rates clearly and prominently on their website
- auto rollover contracts must not have restrictions on notice period or incur a termination fee.
- Suppliers must terminate contract at the end of the initial period if MBC gives notice at least 30 days before the end of the initial period.
- Suppliers must terminate the contract no more than thirty days after MBC gives notice to terminate if such notice is given within the last 30 days of the initial period.
These will require amendments to SLC7A.
One for the Bar later
What impact will Trump have on the price of energy!?