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UK energy supplier Iresa has ceased trading – Ofgem

LONDON (Reuters) – British small energy supplier Iresa Limited has ceased trading, market regulator Ofgem said on Friday, after the company was banned from taking on new clients due to poor customer service.

Iresa, based in northwest London, has less than 100,000 domestic customers.

Last month, Ofgem extended a ban on the firm taking on new clients after it failed to improve customer services.

Under energy market rules, Ofgem also had the power to revoke the firm’s license if it failed to meet requirements.

Iresa was not immediately available for comment.

Ofgem said the energy supply of Iresa’s customers would continue as normal and their outstanding credit balances protected under the regulator’s safety net.

Ofgem added that it will choose a new supplier to take on the company’s customers.

There are over 60 energy suppliers in Britain. An increasing number of people are switching to smaller energy companies due to price hikes from the big six firms – Centrica’s (CNA.L) British Gas, SSE (SSE.L), E.ON (EONGn.DE), EDF Energy (EDF.PA), Innogy’s (IGY.DE) Npower and Iberdrola’s (IBE.MC) Scottish Power.

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Decom Energy taps £58bn UK decommissioning market

Looking for new finds is traditionally thought the exciting part of the oil and gas industry. However, Graeme Fergusson is more interested in the opposite end of the process — plugging old wells and dismantling platforms.

“Our pitch is, ‘dear operators, you don’t want do to this, but we do’,” said the managing director of Decom Energy.

Britain has been investing in the North Sea for more than 50 years. The industry estimates that it could take another 50 to plug thousands of wells and remove hundreds of platforms and thousands of kilometres of pipelines. Executives believe the decommissioning industry, still in its early years, will grow and potentially become a lucrative business in its own right.

The Oil & Gas Authority (OGA), the industry regulator, in June said it estimated the cost to decommission all the infrastructure on the UK Continental Shelf at £58bn from 2018 onwards.

Mr Fergusson hopes his company can capture a slice of the action by taking ownership of declining fields in the final years of production and guiding them through to the end. Decom Energy, he argues, has a key selling point as it can bring its history and expertise as an operator to bear on the challenge. “We see a gap in the market for an operator-led decommissioning specialist,” he said.

It has not been a straightforward journey to reach this point. Decom was formed in 2016 to buy out its operating subsidiary, Fairfield Energy. The latter was launched in 2005 with backing from a clutch of private investors led by private equity group Warburg Pincus to acquire North Sea assets that were being shed by the oil majors and breathe new life into them. Fairfield went on to build a portfolio of fields and in 2008 the company became the operator of assets in the Greater Dunlin Area in the East Shetland Basin, close to the boundary line with Norway.

Fairfield considered an initial public offering in 2010 but this was pulled in part because its portfolio was not broad enough. However, the oil price crash in 2014, which hit the industry hard, finally put paid to its ambitions of becoming a leading North Sea exploration and production group.

In the second half of 2015 the company decided it was time to change direction, said Mr Fergusson. It would transform itself into a decommissioning specialist and start with its own assets in the Dunlin area.

Fast forward to 2016 and Decom Energy Limited was born, backed by its four founders including Mr Fergusson who had joined Fairfield in 2011.

The aim, said Mr Fergusson, was to turn decommissioning into a positive move. Despite the change in strategic direction the company managed to retain most of its core workforce of around 75.

“Engineers like problems,” said Mr Fergusson. The company has already learnt a lot from tackling some of the complex issues in the Dunlin area where three approved decommissioning programmes are already under way. It hopes to offer that expertise to others. Recommended Scottish economy Scotland’s ports gear up for the day North Sea oil runs dry

“Now it’s about striking a deal with the operator,” said Mr Ferguson, adding that talks were under way with several companies about a number of assets. The company will consider different approaches, from offering its expertise as a contractor to taking over the operatorship of mature assets that are beyond the point of major investment.

For Britain’s oil and gas industry it is a steep learning curve. To date, much of the decommissioning activity in other parts of the world such as in the Gulf of Mexico has been of much smaller platforms than in the North Sea. The rough seas also pose a challenge.

Industry executives nevertheless believe decommissioning could become a profitable business with the potential to export the know-how abroad. Aberdeen, the oil capital of the North Sea, was hard hit by the price crash and could also benefit from increased activity.

“Decommissioning is an evolving industry,” said Fiona Legate, senior analyst at Wood Mackenzie, the energy consultancy, adding that “it offers a prize for the supply chain via new business development opportunities”.

Winners will be all the stakeholders involved — from E&P companies if they can reduce their costs as it reduces the total decommissioning bill, to the supply chain in the form of new business opportunities at a time when North Sea development work has been at an all-time low.

“It’s too early too tell when it comes to late life/decommissioning specialists, there is no proof of concept yet,” she added. Reputation is important. The downside to decommissioning is very big Graeme Fergusson

Some work is already under way. Royal Dutch Shell hired the huge, twin-hulled Pioneering Spirit vessel to remove the Brent Delta platform and transport it to Teesside for dismantling last year.

Research is also progressing into new approaches that could reduce costs. A new technique to plug and abandon wells developed by Norway’s Interwell was recently tested for the first time in Europe by Spirit Energy, on an onshore gas well in Yorkshire.

The more experienced companies become, the lower the eventual bill. In its most recent report the OGA said companies already executing decommissioning programmes had made significant efficiencies in the costs of plugging and abandoning wells. Operators are also learning to save money by tackling a large number of wells as part of a single campaign.

“Spreadsheet decommissioning is a thing of the past,” said Mr Fergusson. “Reputation is important. The downside to decommissioning is very big.”

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Co-op Energy hikes gas and electricity bills for thousands of customers

Co-op Energy is raising its gas and electricity prices by 5.2 per cent from next month, a move that will affect up to 128,000 households.

The change, which takes effect from 20 August, will see bills for customers on the standard tariff rise by £61, from £1,158 to £1,218 – a total of £7.8m nationwide.

The bill hike will also impact GB Energy customers, who have been supplied by Co-op Energy since GB ceased trading in 2016.

A spokesperson for Co-op Energy said: “As the largest member-owned energy supplier in the UK, our customers are at the heart of everything we do. That is why we do our best to protect them from price fluctuations wherever possible.

“For that reason, we were the first major energy supplier to automatically move customers onto a new fixed-price default tariff rather than our variable tariffs, and why we have sought to absorb the significant increases in wholesale energy costs this year.

“However, this is not sustainable indefinitely and we have therefore reluctantly taken the decision to pass on some of these costs to customers on our Green Pioneer tariff.”

Rik Smith, uSwitch.com energy expert, said: “The news from Co-operative Energy today is the 25th overall increase announced this year. We have now seen at least one price rise from Britain’s ten biggest energy suppliers in 2018 as well as hikes from numerous smaller providers.”

Mr Smith said that in spite of the recent warm weather, “it has been a tough year for energy customers” who have seen their bills skyrocket by an average of 5.6 per cent, or £58.

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Fuel and energy prices to push UK inflation to four-month high

RECENT hikes in energy costs and petrol prices are expected to send UK inflation to its highest level in four months when official figures are disclosed on Wednesday.

A consensus of economists expect the Office for National Statistics’ (ONS) June Consumer Price Index (CPI) to come in at 2.6 percent, up from 2.4 percent in both May and April.

The last time CPI was higher was in February, when inflation was 2.7 percent.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, expects a stronger reading to match February’s figures.

“The contribution to inflation from motor fuel, electricity and natural gas prices likely leapt.”

He noted that 10 of the 12 largest energy suppliers – including British Gas, Scottish Power, EDF Energy – have announced price rises which will kick in over the summer.

“In addition, BRC (British Retail Consortium) data suggest that core goods inflation rose.”

Mr Tombs was pointing to figures which showed that BRC’s non-food shop price index jumped by 0.9 percent month on month, marking the biggest June increase since the BRC’s records began in 2006.

That increase was due to higher prices for clothing and recreational goods.

A further rise in CPI is likely to strengthen the case for a Bank of England interest rate hike next month, though concerns that prices are rising faster than wages could see rate-setters have second thoughts.

The latest data from the ONS show that average earnings increased by 2.5 percent in the year to May, up just slightly from 2.4% the previous month.

Ed Monk, an associate director for personal investing at Fidelity International, said: “If inflation does jump back up after this weakening in pay growth, then it adds to the conundrum for the Bank of England’s Monetary Policy Committee who are desperate to deliver a rate hike in August’s MPC meeting.

“Higher inflation would support that position but an absence of sustained real wage growth as well as ongoing fears about the impact that Brexit will have on the UK economy means that we could see the ‘unreliable boyfriend’ make an appearance again if Mark Carney and the central bank is forced to make another U-turn come August.”

The EY Item Club earlier this week said it expects a steady slide in CPI over the remainder of the year.

It said: “The steady downward progression in Consumer Price Index (CPI) inflation observed earlier this year looks likely to reverse course, at least temporarily, over the next few months.”

The think-tank said it expects CPI to rise back up to 2.7 percent in the near term before “softening” to end 2018 at 2.3 percent.

That is up from its 2 percent year-end forecast released in the spring.

 

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Gas to overtake oil as world’s primary energy source, say DNV GL

A majority of energy firms expect to see “increased investment” in gas over future oil exploration, a survey by a technical advisory company to the to the sector revealed today.

The survey by DNV GL found that 64% of oil and gas sector leaders said that they “expect to increase or sustain” spending on gas projects this year as the industry as a whole looks to prioritise gas energy sources over traditional oil.

A further 86% of the 813 senior industry respondents surveyed said they expect gas, such as natural gas, to “play and increasingly important role” in the energy mix, up from 77% last year.

The Transition in Motion report findings show the oil and gas industry future outlook and seeks to identify the primary drivers for investment within the global energy transition.

 

Liv Hovem, CEO, DNV GL – Oil & Gas, said: “Society’s transition to a less carbon-intensive energy mix is already a reality, and oil and gas will continue to be crucial components.

“Our research affirms that the industry is already taking positive steps to secure the important role we forecast gas to play in helping to meet future, lower-carbon energy requirements.”

Significantly, 72% of respondents believe that, as traditional coal energy generation becomes obsolete over the coming decades, the long-term attractiveness of gas will significantly improve.

Ms Hovem added: “Significant investment will be needed in the gas industry over the coming decades to increase capacity, transform assets to source and transport a decarbonized mix of energies, and to safely build and maintain the infrastructure needed to connect emerging supply regions with evolving demand centres.”

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Opposing onshore UK windfarms ‘means higher energy bills’

The portfolio of global offshore wind projects in operation, under construction or in development grew by over 10% in the last year according to new data RenewableUK is publishing at our Global Offshore Wind 2018 conference in Manchester.

The new figures from RenewableUK’s Offshore Wind Project intelligence show that the global pipeline of offshore wind projects stands at over 104 gigawatts (GW), up from 95GW in June 2017.

The new figures show the UK retaining the top spot as the largest offshore wind market in the world with a portfolio of 35.2GW, followed by Germany (23.4GW), Taiwan (8.3GW), China (7.7GW) and the USA (7.5GW) rounds out the top 5. These countries share just under 80% of the global market.

The latest figures do not include possible extensions of existing wind farms totalling nearly 3GW recently announced by The Crown Estate – which could push the UK even further ahead when they are confirmed next summer.

Taiwan made the biggest gains in the last 12 months adding 6.7GW which accounts for over two-thirds (68%) of global growth. Although it was not in the top 10 in 2017, Taiwan has powered past the USA and China to become the third largest market in the world and the largest outside Europe.

The UK retains its global number one position in a year which saw auctions for new power contracts (Contracts for Difference) secure offshore wind at half the price of auctions in 2015, making new offshore wind cheaper than new gas and nuclear power plants.

The offshore wind industry in the UK recently announced details of its 2030 vision for the sector which would see 30GW of operational capacity installed by the end of the next decade, providing 30% of UK power needs (up from 7.1GW at present). This would lead to a doubling of jobs to over 27,000. Industry is currently working with Government on a Sector Deal to secure this. Between 2017 and 2021 investment in new offshore wind capacity is expected to total over £18.9bn.

Commenting on the new figures, RenewableUK CEO Hugh McNeal said:

“Our industry is already delivering for the UK and we want to go further, with offshore wind as the backbone of a clean, reliable and affordable energy system. To achieve this ambition, the industry will invest tens of billions of pounds, creating thousands of skilled jobs and supporting prosperous communities across the UK.

Offshore wind is a global growth opportunity and a major energy source. The sector will be worth over £30bn worldwide by 2030 and UK companies must be ready to seize opportunities in new markets. We are transforming the UK supply chain, as we grow our exports five-fold by 2030.”

innogy’s largest offshore market is in the UK, where it operates over 1GW of offshore wind power.innogy’s Director of Offshore Investment & Asset Management, Richard Sandford, said:

 

“The UK has demonstrated true transformational growth, from the early days of our North Hoyle project, the UK’s first commercial scale offshore wind farm, to the modern technologically ground-breaking turbines being installed today. We’re seeing bigger more powerful turbines, further from shore and in deeper waters, with developers like ourselves installing faster than ever. At the same time, the growth in offshore wind has created an industry of manufacturers and suppliers that are becoming increasingly innovative and expert, and are helping positioning the UK as a world-wide hub of offshore expertise.”

Jonathan Cole, Managing Director for Offshore Wind at ScottishPower Renewables, said:

“The UK continues to lead the world in offshore wind, and the industry here is in a strong position to capitalise on export opportunities in growing markets across the globe. We have the skills, knowledge and expertise that other markets need.”

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British Gas in hot water over meters

Britain’s biggest energy supplier has been rebuked by the regulator for forcibly installing an unusually high number of pre-payment meters in homes.

British Gas obtained court warrants to install meters in the homes of about twice as many newly indebted customers as the industry average, Ofgem said.

The regulator said that the tactics were being used “too often” and that suppliers must use forcible installations only as a “last resort”.

Pre-payment meters have to be fed via keys or tokens topped up in shops and post offices before the customer can use gas or electricity. People using them are among the most vulnerable.

Some customers agree to have them installed to help them to manage their payments but suppliers can go to court to install them against their wishes.

British Gas, which is part of Centrica, has about 8 million household customers in the UK. Last year it obtained court warrants for 41,614 pre-payment meter installations, Ofgem figures show, 26 per cent more than in 2016. It accounted for almost half of all such installations across the industry, which rose to 84,230, from 80,594 in 2016.

Although British Gas is the largest supplier, Ofgem said that its installation rate was disproportionately high and it had installed meters in the homes of newly indebted customers at about twice the industry average rate.

Ofgem also highlighted high installation rates of Utility Warehouse, at about five times the industry average, and Ovo Energy, at about a third higher than the industry average, but said that their rates had improved since 2016.

A British Gas spokesman said: “Warrants are only ever issued as a last resort and we have seen a decrease in the numbers carried out this year.”

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SSE hits 2.4 million customers with gas and electricity bill hike

SSE will hit around 2.4 million customers with energy bill hikes in July, making it the latest big supplier to raise gas and electricity prices.

Households supplied by the company will see bills rise by an average of £76 per year, or 6.7 per cent for those on a dual fuel tariff.

Gas prices will jump 5.7 per cent while electricity will increase by 7.7 per cent on 11 July.

This will equate to an average rise of around £1.50 a week for customers buying both gas and electricity.

The increases are significantly above both inflation and the pace of wage growth, meaning a further squeeze for households.

Stephen Forbes, chief commercial officer of SSE Energy Services, said: “We deeply regret having to raise prices and have worked hard to withstand the increasing costs that are largely outside our control by reducing our own internal costs.

“However, as we’ve seen with recent adjustments to Ofgem’s price caps, the cost of supplying energy is increasing and this ultimately impacts the prices we’re able to offer customers.”

The move from SSE comes after all the other five of the big six suppliers increased prices in recent months.

Npower announced in April that it would increase the cost of its average energy bill by 5.3 per cent,

That came after Labour’s shadow cabinet office minister, Jon Trickett, accused British Gas of delivering a “slap in the face” to customers with its own 5.5 per cent hike.

Earlier this month, E.On reported a 41 per cent rise in profits, just weeks after slapping households with price rises.

In total, around nine million households will see bills rise over the summer, with the average dual fuel tariff now costing £100 per month, according to Money Saving Expert (MSE).

MSE founder Martin Lewis accused the big energy firms of acting like sheep by all raising prices in quick succession.

“Npower is the worst offender, charging someone with typical use £1,230 a year – well over £100 a month,” Mr Lewis said.

“Eon has the least-worst of the big six standard tariffs at £1,153. Yet even that is massively over the odds.

“Anyone on a big six standard tariff is ripping themselves off by failing to take action. Do-nothings pay massively more than the do-somethings.

“Switch firm and you could cut bills to almost £800 a year, even with the same usage.

“And even if for some reason you’re loyal to your current provider, almost all big six suppliers have alternative tariffs over £100 a year cheaper than their standard deals. However, they operate ‘don’t ask, don’t get’ policies. So at the very least, ask!”

No Brexit for energy as UK set to draw more power from EU

As the U.K. government works to exit the European Union, the nation’s electric utilities are working to get closer.

Power already flows between the U.K., France, Ireland and Northern Ireland through four interconnector cables, and work is under way to more than quadruple the capacity of those links. The cables, detailed in the chart below, will establish a stronger physical tie with the continent regardless of what politicians decide on Brexit.

The investments mark a contrast with Prime Minister Theresa May’s effort to make the U.K. more independent of its continental neighbors. Building more power cables between nations will bind Britain’s electricity market closer to those of continental Europe. That will benefit both Britain and Europe, giving grid managers everywhere additional flexibility to respond to shocks and the system and to buy the cheapest power.

 

The Brexit process may undermine the economic and logistical case for using interconnectors. To maintain flows after April 1, the U.K. must agree to remain part of the EU internal energy market. That must be written into Britain’s agreement with the EU to exit the union, and that hasn’t happened so far. What happens to electricity if there’s a no-deal hard Brexit would add so much friction to the system that utilities think it’s unthinkable.

For two decades, energy interconnectors have become more common throughout Europe as the union sought to build a single market in energy. The U.K. has been a major proponent in that process—and a big beneficiary.

For an island nation like Britain, links are a helpful source of cheap electricity and flexibility for grid managers, who would otherwise have to rely on utilities building costly generation plants. They give another source of electricity at peak times, like the cold winter days when there’s high demand for heating.

Whether the U.K. can still rely its neighbors for energy at times of stress depends on the the U.K.’s energy relationship with the EU after Brexit. Those matters haven’t had much discussion yet. Policy makers have focused on other issues like the nature of the border with Ireland. Some analysts are warning greater dependence on the EU leaves Britain’s grid vulnerable.

“If rules governing the flows of electricity and gas around Europe are set outside the influence of the U.K., that could change how comfortable we are relying on imports,” Neil Cornelius, managing director at the Berkeley Research Group LLC said.

At the moment, the biggest link Britain has is with France, which exports excess power from its network of nuclear power plants. Despite Brexit, the energy industry is forging ahead with plans to build 11 more interconnectors bringing total capacity to almost 18 gigawatts—more than a third of current peak demand.

Not all of these projects are likely to get built, since EU funding for some of them may disappear with Brexit, according to John Feddersen, chief executive of Aurora Energy Research Ltd. And if Britain is treated as a third country outside the EU, that could reduce the willingness some nations have in supplying power to the U.K. in an emergency.

“Irrespective of Brexit, if the lights are about to go out in France, they wouldn’t be sending us power anyway,” he said.

Interconnectors improve security of electricity supply and help to reduce bills for consumers. They provide flexibility for grid managers, like power to back up intermittent flows from renewables such as solar and wind farms, the U.K. Department of Business, Energy and Industrial Strategy says.

The projects in development are expected to cut bills by as much as 20 billion pounds ($26.6 billion), the government estimates.

“An alternative to interconnectors would be to develop additional generation at home, and potentially gas storage,” Cornelius said. “These would enhance supply security. But there are obviously costs associated with this.”