0344 770 2345 info@businessutilitiesuk.co.uk

DCPs 332 and 333 – appropriate treatment and allocation of SoLR-related costs

We have approved DCUSA Change Proposals 332 and 333. The two proposals formalise the Supplier of Last Resort cost recovery process into the distribution charging methodologies, covering Last Resort Supply Payment and eligible use of system bad debt.

The Authority approved these modifications on 1 October 2019.

 

Rachel Reeves comments on Government response

Rachel Reeves MP, Chair of the Business, Energy and Industrial Strategy (BEIS) Committee has commented today on the publication of the Government’s response to the Committee report on Carbon Capture Usage and Storage and on the new administration’s overall approach to achieving net zero carbon emissions by 2050.

Given the Government’s ‘disappointing’ response on Carbon Capture Usage and Storage (CCUS), which ‘appears to row back from statements made by former Ministers’, the Chair has also written to the Minister Kwasi Kwarteng with a series of questions seeking to establish the Government’s policy direction on CCUS.

Chair’s comments

Rachel Reeves MP, Chair of the Business, Energy and Industrial Strategy (BEIS) Committee said:

“The Secretary of State is happy to reiterate the Government’s commitment to net-zero by 2050 but fails to give any sense that her Government is dedicated to the urgent actions necessary to achieve it.

“It’s easy to set a target. The harder challenge is putting in place the measures needed to get to net-zero by 2050. Unfortunately, the Secretary of State’s letter gives little confidence that the Government has a clear idea of the policies it wants to pursue to make UK net-zero carbon emissions a reality. Given the UK is hosting COP26 next year, it’s important that we provide international leadership by getting our act together at home on climate change policy.

“It’s encouraging that the Treasury’s review will look at the benefits, as well as the costs, of net zero. Ending the UK’s contribution to climate change has the potential for major health and environmental benefits. It is also crucial the Treasury examines where costs will fall, how the transition can be funded, and how to manage the impacts on bill-payers, motorists and carbon-intensive industries.”

“The Minister’s response to our Carbon Capture Usage and Storage report is very disappointing and sits in contrast to the initial enthusiasm to our findings displayed by the previous Minister, Claire Perry. The Government’s response barely engages with the specific recommendations of our report and it is worrying that the Government now appears to be rowing back on previous commitments. This must be concerning for industry and investors and I hope the Government will rethink its approach and come forward with a clearer indication of what it is doing to ensure CCUS technology is able to deliver on its potential.”

In July, Rachel Reeves MP, Chair of the Business, Energy and Industrial Strategy (BEIS) Committee wrote to Rt Hon Andrea Leadsom, the then new Secretary of State for DBEIS, to press for action on a series of policy fronts such as electric vehicles, carbon capture usage and storage, and energy efficiency, to ramp up UK efforts to meet future carbon budgets and the net-zero 2050 target.

In April, the BEIS Committee published its report, Carbon capture usage and storage: third time lucky? The report urged the Government to give a clear policy direction to ensure the UK was able to seize the industrial and decarbonisation benefits of carbon capture usage and storage (CCUS). The report noted that although the UK has one of the most favourable environments globally for CCUS the technology had suffered 15 years of turbulent policy support, including the cancellation of two major competitions at a late stage. No commercial-scale plant for CCUS has yet been constructed in the UK.

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SSE to cut energy prices by 6% from October 1, in line with UK price cap

LONDON (Reuters) – Britain’s SSE (SSE.L) will cut energy bills for customers on its standard tariff from Oct. 1, with prices falling 6% in line with regulator Ofgem’s price cap, the company said on Wednesday.

The cap on default electricity and gas bills – a flagship policy of former British Prime Minister Theresa May to end what she called “rip-off” prices – came into force in January.

In August Ofgem said the cap would be lowered by 6% from Oct. 1 to 1,179 pounds per year for average energy use to reflect lower wholesale energy prices.

 

SSE said an average user on its standard tariff would pay 6% less, or 1,178.58 pounds a year, and those on pre-pay meters would pay an average of 1,216.90 pounds a year.

However, a small number of customers who use very little energy could see an increase in prices, SSE said, due to a change in the way the standard charge rates – the fees paid by all customers for access to the energy system – are calculated.

“All customers who are negatively impacted by the change will receive a letter/email to explain how the Ofgem cap works and why we’re changing our prices,” SSE said.

Britain’s Competition and Markets Authority said earlier this year that the way standard charges are calculated should better reflect costs for suppliers.

Britain’s other five big six energy providers – E.ON (EONGn.DE), Centrica’s (CNA.L) British Gas, Iberdrola’s (IBE.MC) Scottish Power, Innogy’s (IGY.DE) npower and EDF’s (EDF.PA) EDF Energy – are all expected to make similar price cut announcements ahead of the Oct. 1 deadline.

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Future Charging and Access programme – consultation on refined residual charging banding in the Targeted Charging Review

In November 2018, we published our minded-to decision and draft Impact Assessment on the Targeted Charging Review (TCR) covering proposed reforms to residual charges and non-locational Embedded Benefits. In June 2019, we consulted on further matters, including updated analysis on the Capacity Market and system costs, and the findings of the Balancing Services Charges Task Force.

We received over 130 responses to our minded-to decision, and a further 23 representations to our supplementary consultation. Having considered these responses, we wish to update stakeholders on refined proposals for reform of residual charges and provide the opportunity to comment on them, before we make our final decision.

Alongside this letter, and following requests from some industry participants, we are also publishing a sensitivity analysis we have undertaken on the implications of our proposed reforms on renewable generation.

We welcome any stakeholder feedback on the proposals and additional analysis outlined in this letter by email to TCR@ofgem.gov.uk by 25 September 2019.

Great Britain power system disruption review

Details

On Friday 9 August 2019 a power disruption resulted from the operation of Low Frequency Demand Disconnection relays on the Great Britain power system at about 4.54 pm. It impacted hundreds of thousands of customers, and caused significant secondary impacts in particular to the transport network. Though demand was fully restored within 90 minutes, the secondary impacts continued to be felt for much of the day.

The Secretary of State for Business, Energy & Industrial Strategy has commissioned the Energy Emergencies Executive Committee (E3C) to undertake a comprehensive review of the incident. The review should identify lessons and recommendations for the prevention and management of future power disruption events. In particular E3C will:

  • assess direct and secondary impacts of the event across GB electricity networks
  • Identify areas of good practice and where improvements are required for system resilience
  • consider load shedding in regard to essential service customers and prioritisation
  • consider timeliness and content of public communications during the incident
  • make recommendations for essential service resilience to power disruptions

E3C will submit a final report to the Secretary of State within 12 weeks, with an interim report within 5 weeks. These will be published here. BEIS will provide the secretariat for the review.

E3C is a partnership between government, the regulator, and industry, which ensures a joined up approach to emergency response and recovery.

Documents

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United Oil & Gas Confirms Award Of Four UK North Sea Blocks

(Alliance News) – United Oil & Gas Ltd said Monday it has accepted the formal offer from the Oil & Gas Authority for the awarding of four blocks in the UK North Sea in the UK 31st offshore licensing round.

The oil & gas company now holds a 100% interest in blocks 14/15c, 15/11c, 15/12a and 15/13c, which make up Licence P2480. The blocks cover an area of 500 square kilometres, and includes the Zeta prospect which United estimates could contain around 90 million barrels of in-place oil.

The blocks were awarded on the basis of a low-cost work programme involving the purchase of an existing high-quality 3D seismic dataset and detailed geological and geophysical analysis.

In the same licencing round, United Oil & Gas was provisionally awarded a 10% interest in blocks 98/11b and 98/12 in the English Channel. The company said it expects to receive confirmation on those licence in the coming weeks.

“We are delighted with these awards, which, based on extensive technical work carried out over the available acreage ahead of the application were our primary focus for the 31st round,” said Chief Operating Officer Jonathan Leather.

“This is our second successful UK licencing round and our largest award to date. United has done well to be included in the roster of companies which have been successful in this round, including Chrysaor, Equinor, Chevron and Total,” Leather added.

Shares for United Oil & Gas were untraded on Monday, last quoted at 4.07 pence in London.

By Dayo Laniyan; dayolaniyan@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

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Wind and gas projects keeping the southern North Sea busy

It is arguably leading the energy transition way for the UK, with multi-hundred to gigawatt class wind farms rubbing shoulders with significant gas production.

“We’re very much in the ascendancy,” said Simon Gray, chief executive of trade organisation East of England Energy Group (EEEGR).

“We now have off the east coast of England something like 56% of the UK’s offshore wind generation capacity and this is expected to go on increasing through to 2030.

“As the UK’s offshore wind capacity increases, we’re set to remain around the 50%-plus level.

“The reasons for that are simple and include shallow waters, a decent seabed for installing turbines, a good wind resource and easy access to the largest electricity markets in Britain: London, the south-east and the Midlands.

“And of course considerable quantities of natural gas are still being produced from the Southern Gas Basin, where new field discoveries continue to be made, albeit those are tight resources and therefore harder to develop and produce.

“We still have some of the largest volumes of decommissioning on the UKCS.

“The SNS is where the UK’s offshore story began in terms of gas and a considerable number of the platforms still out there are 30, 40, 50 years old.”
Change is in the air for the membership of EEEGR, whose supply chain membership is probably the most diverse of any energy trade body in the UK.

“Transition is the word on everyone’s lips,” Mr Gray said. “And that’s exactly where we are.

“We’re the part of the UK that is experiencing the greatest migration from fossil fuels towards renewables. And that process in theory needs to have been completed by 2050.

“Although gas is currently on the back foot because of weak prices, it still accounts for 28% of UK electricity generation compared with 2.3% from coal, 20% from nuclear and wind nearly 30%.”

In terms of indigenous UK gas production, the SNS accounts for around 30% via the Bacton terminal in Norfolk.

A major operation is under way to protect this strategically important facility from being engulfed by the North Sea as sea levels rise.

The £20 million-plus “sandscaping” is intended to protect a 5.6km stretch of coast by rebuilding beaches using huge volumes of sand.

Bacton is absolutely vital to current gas basin production and future development potential. And it handles significant volumes of imported gas via the North Sea’s hugely important interconnector network.

Gas has a critical transitional role to play for the next couple of decades at least and the SNS current revival is being usefully stimulated by the Oil and Gas Authority’s Southern

North Sea Tight Gas Strategy published in June 2017.

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UK GAS-Prices jump as demand surge outstrips supply

LONDON, Sept 9 (Reuters) – British prompt wholesale gas prices jumped on Monday as a spike in demand due to colder weather and lower wind generation outstripped supply.

* Gas for immediate delivery rose 5.05 pence to 28.50 pence per therm at 0745 GMT.

* Day-ahead gas was yet to trade although the contract was bid at 27.00 pence, compared to a closing price of 25.10 pence per therm.

* The system opened undersupplied by 20 million cubic metres (mcm) with demand forecast at 186.2 mcm and supply seen at 167.7 mcm, National Grid data showed.

* The demand figure was very strong compared to the summer months and was 72 mcm above the seasonal norm, the data showed.

* Demand was boosted by falling temperatures prompting gas heating in some households to be switched on – residential demand is expected at 84 mcm, about 10 mcm higher than last week.

* Gas-for-power demand was also higher, after wind generation dropped off significantly to 3.2 gigawatts (GW) from close to peak capacity at 12 GW on certain days last week.

* Gas for power demand for Monday is at 57 mcm compared to levels of between 30 and 40 mcm on most days last week.

* On the supply side, flows from Norway through the Langeled pipeline remained low at 7 mcm/day, ahead of a shutdown expected on Tuesday for annual maintenance until Sept. 24.

* However, four liquefied natural gas (LNG) tankers are now expected to arrive in Britain in the next seven days, a relatively high number compared to recent weeks.

* Gas send-out rates from LNG terminals tend to increase in the days leading up to tanker arrivals as the facilities empty their storage to receive the new cargoes.

* In the Dutch gas market, the day-ahead gas price at the Dutch TTF hub was up 0.3 euro at 9.70 euros per megawatt hour.

* Benchmark Dec-19 EU carbon contract was 0.19 euro higher at 25.27 euros a tonne. (Reporting by Sabina Zawadzki; Editing by Susan Fenton)

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Octopus Energy buys out rival to propel it into the big time

Octopus Energy has struck a deal to become one of the UK’s fastest growing energy suppliers after agreeing to buy a smaller rival.

The energy challenger brand told its staff on Wednesday that it has agreed to buy Co-op Energy, which supplies gas and electricity to about 300,000 homes.

Octopus, which supplies 850,000 customers, is expected to confirm early on Thursday that the deal will nudge its business past 1 million customers after only four years in the market.

The deal, thought to be worth more than £30m, propels Octopus to within a whisker of rival supplier Bulb Energy, which supplies 1.4 million customers and is the UK’s fastest growing new supplier.

It follows a flurry of deals within the energy market which is beginning to consolidate after a flood of new suppliers joined the market in recent years, many of which have proved financially unstable.

Co-Op Energy snapped up 160,000 customers from GB Energy Supply after it collapsed in 2016, and then gained another 130,000 customers after its takeover of Flow Energy last year.

The company, part of the Midcounties Co-op, has since run into financial trouble. It revealed deepening losses earlier this year in the Co-op’s financial report, which hinted that the supplier might be sold to protect the wider business.

Octopus Energy, which is owned by Octopus Group, is also loss-making but has the full support of its investment fund owner which has ambitions to grow the business to compete with the big six.

Octopus Group was an early backer of the property site Zoopla and backs Big Gym, Secret Escapes and Eve mattresses through its investment arm Octopus Ventures.

Its fast-growing energy supplier bought smaller rival Affect Energy last September and took on the customers of failed energy start-up Iresa in December last year.

It also won a lucrative contract to supply energy to M&S Energy customers that was previously held by SSE for nine years.

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Strong winds in Europe boost Innogy’s H1 renewables profit

Above average winds in most of continental Europe coupled with higher electricity prices have boosted earnings in Innogy’s renewables segment during the first half of this year, ahead of the likely re-incorporation of the German utility’s green generation business into parent RWE.

Adjusted earnings before interest, taxes, depreciation and amortisation in renewables rose to €415m ($464m) in the first half of 2019, compared to €322m in the same period a year earlier.

Innogy’s renewable generation business together with that of rival E.ON will be bundled under a new RWE, while Innogy’s grids and retail segments are slated to go to a beefed-up E.ON if a complex share and asset swap deal wins final approval by competition authorities – a move expected in September by E.ON.

Wind levels in North-Eastern, Central and much of Southern Europe – regions where most of Innogy’s onshore wind farms are located – during the first half were higher than the long-term average, more than compensating for lower winds in the UK, Ireland and the Netherlands.

That helped the utility’s output from renewable sources to rise to 5.5TWH, from 5.3TWh in the year-ago period.

Rising electricity prices in the UK and Germany also pushed earnings higher, although some 60% of Innogy’s renewables earnings are quasi-regulated due to fixed feed-in tariffs (FITs) in Germany.

A positive contribution to earnings came also from operational improvements of the existing portfolio in part from a bonus for timely, on-budget completion of the Galloper offshore wind farm in the UK and higher earnings at the Belectric project development subsidiary.

“In Renewables, the fact that we extended our scope to international markets right from the outset has paid off,” said chief executive Uwe Tigges.

“We currently have three large-scale projects simultaneously under construction: the Limondale solar plant in Australia, the Triton Knoll offshore project in the UK, and the Scioto Ridge onshore wind farm in the US.”

Earnings were also bolstered by onshore wind farms commissioned in 2018 and 2019 in the UK, Ireland and Italy.

Innogy’s overall adjusted Ebitda fell to €2.14bn during the first half compared to €2.25bn in the same period in 2018, while net profit went down to €488m compared to €662m during the first half of 2018, as lower grids and retail earnings pulled results down.

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