Good conduct for water retailers, Project Management at Hinkley... and other UK energy industry updates

Published: Fri 27 May 2016
A blog entry by Georgina Penfold

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Georgina Penfold
Available for consutancy work

Georgina Penfold's Blog

It’s been a couple of weeks since my last blog, so I’ve really struggled to narrow down which news, views and political stories to include. The last couple of weeks have been a very interesting time in utility terms. We have coal-free power, cost free weekends, a water Code of Practise and even the Queen gets a mention.

With apologies to all non-England based readers, I’ll start with water since theBusiness Customer Protection Code of Practice was published on Thursday 19th May. This sets out the standards by which water retailers and to a lesser extent, third party customer representatives are expected to behave once the water retail market opens in April 2017. The points which jumped out at me are:

  • Retailers have to ensure they have a valid contract before requesting a switch and shall take steps to avoid erroneous transfer;
  • Retailers objecting to a switch have to give the customer a reason for cancellation and advise on timescales to resolve the issue;
  • Final bills must be issued within six weeks of contract termination;
  • An onus is placed on the retailer to ensure that Third Party Intermediaries (brokers) are aware of this Code of Practice and where relevant, also comply
  • All metered supply points should be billed on actual meter readings at least once a year; and - music to the ears of anyone who has ever experienced a long-term issue with utilities billing -
  • Back bills (e.g. when a customer has been under-charged, or not billed at all) can only be issued for a maximum of 16 months – at present its six years.

I think this is one of the better written industry Codes of Practice I have ever seen and I would advise customers to download a copy and keep on file so that you know your rights before we enter the dog-eat-dog world of water competition, negotiating best prices through a daily hustle. Or, more realistically, we issue a tender once every so often.

So, onto the news…

Industry News

The National Grid recently celebrated the first time in over 130 years that no coal-fired generation contributed to the UK electricity mix. This happened not once, but twice, signalling what many hope will be the start of a permanent transition to a low carbon power network. The significant event comes after a series of recent closures of coal-fired generators, partly driven by government policy to see coal phased out by 2025 and partly by low current wholesale prices meaning coal-fired plant is simply not particularly economic right now. There has also been a massive increase in generation from renewable sources and several large thermal generation plants have switched from burning coal to biomass, the best publicised of course being the mighty DraxNational Grid have also reported a 6% increase in profits*, largely due to increased import of power through the interconnectors with France.

This is clearly all bad news for workers in UK based fossil fuel industries.Rugeley Power Station in Staffordshire has announced its intended closure* in June and the UK oil and gas industry has seen a 15% loss of headcount in the last 12 months and North Sea operators are set to make further job losses*.

As the summer leads to lower demand and traditional shut-downs for planned maintenance, I sure all you avid viewers of Grid Watch will be cheering on the green underdogs of the power game. But lest we get too excited about our new, carbon-free electric future, there’s a much stronger team in Europe as Portugal ran on renewables for four consecutive days last week. They might beat us at generating wind power but I’m sure we’ll show those Portuguese a thing or two once Euro 2016 starts…. of course we may not show them how to win a football contest either, but I’m sure we’ll show them something.

In a rather eye-brow raising piece of news last week, British Gas announced that they don’t want to bill anyone. No, I’m not referring to their much publicised unfortunate experience in implementing a new billing system, instead I’m referring to their latest domestic offering that sees free electricity offered to households on Saturday and Sunday. At times of low national demand – such as weekends – the National Grid actually want to increase consumption. This is because it is not easy to get thermal generation sets fired up again once they’ve been switched off, particularly with coal-fired plant which isn’t much good at rapid response. Consequently, when high wind generation added to the baseload coal, nuclear and gas is combined with low demand we end up with too much power. Luckily, this can work in our favour. Demand-side response, a technique to control consumption depending on what is happening with the grid can be quite lucrative. There are a number of aggregators who can help you to do DSR, so if you want details let me know and I’ll put you in touch with a few providers.

Whitehall and Westminster

The Energy and Climate Change Committee have been very busy this week. Firstly, they have called for a consultation on the future of Innovate UKwhich is being run by BIS. The body that recently set up Energy Systems Catapult, to look at smart systems and heat may be incorporated into a new umbrella company, UK Research and Innovation alongside the Research Councils and Research England. Mostly though, the ECCC have been discussing the delays to construction of the much troubled Hinkley Point C nuclear power station. This project just becomes increasingly beset with problems, the latest of which is that as EDF face significant criticism in their native France, the French Trade Unions are unlikely to lend support. It is rather optimistic, then that EDF chief, Vincent de Rivas claims that no other project is“as well prepared to be a success”. This worries me because it rather implies those projects that myself and others are working on where we have the support of the staff, the project director has stayed in post, we’ve secured funding and we actually have a signed contract are all doomed to failure. Maybe I didn’t pay attention during my Prince 2 Project Management training and have merely been winging it ever since. However, Tim Yeo disagrees with Monsieur de Rivas. The Chair of New Nuclear Watch Europe, and former chair of the Energy and Climate Change Committee is calling for the government to pause its energy strategy and think again whilst Lady Thatcher’s former energy secretary, Lord Howell claims the Chinese plan to bypass EDF altogether and build their own nuclear power station.

Meanwhile, the Chief Exec of Ofgem has reportedly claimed that within the next 20 years, the energy distribution networks may become open to competition. Speaking at Utility Week, Mr. Nolan commented that, at the time of privatisation, the vision for the energy system was that “regulated natural monopolies” would one day be open to competition and commented that Ofgem have not made as much progress as he would have liked. Sadly, progress in energy terms undoubtedly means spending money and the latest research by energy consultants Cornwall Energy suggests current policies will add £105 to a typically bill by 2020*.

Speaking of competition, in the Queens speech, plans were confirmed to introduce the Competition and Market Authority’s proposed energy market remedies as legislation. The ‘Better Markets Bill’ aims to boost competition and give consumers greater choice. In Wales, greater powers over consent for on-shore wind farms will be devolved to Welsh Ministers.

Finally for political news, the Northern Irish ministers have tabled an Early Day Motion to extend the Warm Home Discount Scheme, which gives pensioners a rebate on winter fuel consumption, into Northern Ireland.

Trading News

The UK power market has witnessed limited activity lately. Wind output is low and forecasts remain low for the Bank Holiday weekend. Prices for Day Ahead are around 3.3p per kWh with Winter 16 trading closer to 4p per kWh.

Gas contracts are trading slightly higher at the moment, following a bullish (upwards) movements in oil trading recently. Prices are also buoyed by a weak pound sterling against the Euro – a situation likely to continue until at least 23 rdJune. Prices for Day ahead are around 31 p per therm (1.06 p/kWh) whilst further out, gas prices for Winter ’16 are trading around 36p per them (1.2 p/kWh).

Brent Crude has settled slightly lower after trading for a period at above $50 per barrel although the higher prices incentivise production which consequently return the downwards pressure. Trades are currently at around $49/bbl.

Until next time, I hope you all have a lovely Bank Holiday,

Yours busily,