Rural residents want wind turbines

By CTV.ca


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Manitoba is home to one of the largest wind farms in Canada. The province is harvesting Manitoba winds to generate electricity in St. Leon - and now some rural property owners are considering doing the same thing on a smaller scale.

Rene Ritchot owns a farm in the R.M. of Morris. Every year he uses 50,000 megawatts of electricity. Instead of relying on Manitoba Hydro for that power, Ritchot would like to harvest the wind and generate it himself.

"I'm already convinced that it's the right thing to do for the planet," he said. "And it could allow Manitoba Hydro to sell so much more hydro."

Recently his rural municipality created a bylaw making it easier for people to place wind towers on their property. Ritchot and two other people have expressed interest.

But while Ritchot likes the idea - the price for a turbine is still a little too high.

"If I was to get a wind turbine, it would be for 50,000 kilowatts," he told CTV News. "That would cost up to $100,000, and that would take quite a few years to repay."

Ritchot would like to see the province give incentives to lessen the cost of being environmentally friendly.

The province says it already gives incentives to people who generate more power than they use. It's called the Net Metering Policy. Manitoba Hydro pays anyone who generates extra electricity. However - the province says it won't help property owners pay start-up costs for wind turbines.

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Renewables surpass coal in US energy generation for first time in 130 years

Renewables Overtake Coal in the US, as solar, wind, and hydro expand grid share; EIA data show an energy transition accelerated by COVID-19, slashing emissions, displacing fossil fuels, and reshaping electricity generation and climate policy.

 

Key Points

It refers to the milestone where US renewable energy generation surpassed coal, marking a pivotal energy transition.

✅ EIA data show renewables topped coal consumption in 2019.

✅ Solar, wind, and hydro displaced aging, costly coal plants.

✅ COVID-19 demand drop accelerated the energy transition.

 

Solar, wind and other renewable sources have toppled coal in energy generation in the United States for the first time in over 130 years, with the coronavirus pandemic accelerating a decline in coal that has profound implications for the climate crisis.

Not since wood was the main source of American energy in the 19th century has a renewable resource been used more heavily than coal, but 2019 saw a historic reversal, building on wind and solar reaching 10% of U.S. generation in 2018, according to US government figures.

Coal consumption fell by 15%, down for the sixth year in a row, while renewables edged up by 1%, even as U.S. electricity use trended lower. This meant renewables surpassed coal for the first time since at least 1885, a year when Mark Twain published The Adventures of Huckleberry Finn and America’s first skyscraper was erected in Chicago.

Electricity generation from coal fell to its lowest level in 42 years in 2019, with the US Energy Information Administration (EIA) forecasting that renewables will eclipse coal as an electricity source this year, while a global eclipse by 2025 is also projected. On 21 May, the year hit its 100th day in which renewables have been used more heavily than coal.

“Coal is on the way out, we are seeing the end of coal,” said Dennis Wamsted, analyst at the Institute for Energy Economics and Financial Analysis. “We aren’t going to see a big resurgence in coal generation, the trend is pretty clear.”

The ongoing collapse of coal would have been nearly unthinkable a decade ago, when the fuel source accounted for nearly half of America’s generated electricity, even as a brief uptick in 2021 was anticipated. That proportion may fall to under 20% this year, with analysts predicting a further halving within the coming decade.

A rapid slump since then has not been reversed despite the efforts of the Trump administration, which has dismantled a key Barack Obama-era climate rule to reduce emissions from coal plants and eased requirements that prevent coal operations discharging mercury into the atmosphere and waste into streams.

Coal releases more planet-warming carbon dioxide than any other energy source, with scientists warning its use must be rapidly phased out to achieve net-zero emissions globally by 2050 and avoid the worst ravages of the climate crisis.

Countries including the UK and Germany are in the process of winding down their coal sectors, and in Europe renewables are increasingly crowding out gas as well, although in the US the industry still enjoys strong political support from Trump.

“It’s a big moment for the market to see renewables overtake coal,” said Ben Nelson, lead coal analyst at Moody’s. “The magnitude of intervention to aid coal has not been sufficient to fundamentally change its trajectory, which is sharply downwards.”

Nelson said he expects coal production to plummet by a quarter this year but stressed that declaring the demise of the industry is “a very tough statement to make” due to ongoing exports of coal and its use in steel-making. There are also rural communities with power purchase agreements with coal plants, meaning these contracts would have to end before coal use was halted.

The coal sector has been beset by a barrage of problems, predominantly from cheap, abundant gas that has displaced it as a go-to energy source. The Covid-19 outbreak has exacerbated this trend, even as global power demand has surged above pre-pandemic levels. With plunging electricity demand following the shutting of factories, offices and retailers, utilities have plenty of spare energy to choose from and coal is routinely the last to be picked because it is more expensive to run than gas, solar, wind or nuclear.

Many US coal plants are ageing and costly to operate, forcing hundreds of closures over the past decade. Just this year, power companies have announced plans to shutter 13 coal plants, including the large Edgewater facility outside Sheboygan, Wisconsin, the Coal Creek Station plant in North Dakota and the Four Corners generating station in New Mexico – one of America’s largest emitters of carbon dioxide.

The last coal facility left in New York state closed earlier this year.

The additional pressure of the pandemic “will likely shutter the US coal industry for good”, said Yuan-Sheng Yu, senior analyst at Lux Research. “It is becoming clear that Covid-19 will lead to a shake-up of the energy landscape and catalyze the energy transition, with investors eyeing new energy sector plays as we emerge from the pandemic.”

Climate campaigners have cheered the decline of coal but in the US the fuel is largely being replaced by gas, which burns more cleanly than coal but still emits a sizable amount of carbon dioxide and methane, a powerful greenhouse gas, in its production, whereas in the EU wind and solar overtook gas last year.

Renewables accounted for 11% of total US energy consumption last year – a share that will have to radically expand if dangerous climate change is to be avoided. Petroleum made up 37% of the total, followed by gas at 32%. Renewables marginally edged out coal, while nuclear stood at 8%.

“Getting past coal is a big first hurdle but the next round will be the gas industry,” said Wamsted. “There are emissions from gas plants and they are significant. It’s certainly not over.”
 

 

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B.C. Hydro misled regulator: report

BC Hydro SAP Oversight Report assesses B.C. Utilities Commission findings on misleading testimony, governance failures, public funds oversight, IT project risk, compliance gaps, audit controls, ratepayer impacts, and regulatory accountability in major enterprise software decisions.

 

Key Points

A summary of BCUC findings on BC Hydro's SAP IT project oversight, governance lapses, and regulatory compliance.

✅ BCUC probed testimony, cost overruns, and governance failures

✅ Project split to avoid scrutiny; incomplete records and late corrections

✅ Reforms pledged: stronger business cases, compliance, audit controls

 

B.C. Hydro misled the province’s independent regulator about an expensive technology program, thereby avoiding scrutiny on how it spent millions of dollars in public money, according to a report by the B.C. Utilities Commission.

The Crown power corporation gave inaccurate testimony to regulators about the software it had chosen, called SAP, for an information technology project that has cost $197 million, said the report.

“The way the SAP decision was made prevented its appropriate scrutiny by B.C. Hydro’s board of directors and the BCUC, reflecting governance risks seen in Manitoba Hydro board changes in other jurisdictions,” the commission found.

“B.C. Hydro’s CEO and CFO and its (audit and risk management board committee) members did not exhibit good business judgment when reviewing and approving the SAP decision without an expenditure approval or business case, highlighting how board upheaval at Hydro One can carry market consequences.”

The report was the result of a complaint made in 2016 by then-opposition NDP MLA Adrian Dix, who alleged B.C. Hydro lied to the regulatory commission to try to get approval for a risky IT project in 2008 that then went over budget and resulted in the firing of Hydro’s chief information officer.

The commission spent two years investigating. Its report outlined how B.C. Hydro split the IT project into smaller components to avoid scrutiny, failed to produce the proper planning document when asked, didn’t disclose cost increases of up to $38 million, reflecting pressures seen at Manitoba Hydro's debt across the sector, gave incomplete testimony and did not quickly correct the record when it realized the mistakes.

“Essentially all of the things I asserted were substantiated, and so I’m pleased,” Dix, who is now minister of health, said on Monday. “I think ratepayers can be pleased with it, because even though it was an elaborate process, it involves hundreds of millions of spending by a public utility and it clearly required oversight.”

The BCUC stopped short of agreeing with Dix’s allegation that the errors were deliberate. Instead it pointed toward a culture at B.C. Hydro of confusion, misunderstanding and fear of dealing with the independent regulatory process.

“Therefore, the panel finds that there was a culture of reticence to inform the BCUC when there was doubt about something, even among individuals that understood or should have understood the role of the BCUC, a pattern that can fuel Hydro One investor concerns in comparable markets,” read the report.

“Because of this doubt and uncertainty among B.C. Hydro staff, the panel finds no evidence to support a finding that the BCUC was intentionally misled. The panel finds B.C. Hydro’s culture of reticence to be inappropriate.”

By law, B.C. Hydro is supposed to get approval by the commission for rate changes and major expenditures. Its officials are often put under oath when providing information.

B.C. Hydro apologized for its conduct in 2016. The Crown corporation said Monday it supports the commission’s findings and has made improvements to management of IT projects, including more rigorous business case analyses.

“We participated fully in the commission’s process and acknowledged throughout the inquiry that we could have performed better during the regulatory hearings in 2008,” said spokesperson Tanya Fish.

“Since then, we have taken steps to ensure we meet the highest standards of openness and transparency during regulatory proceedings, including implementing a (thorough) awareness program to support staff in providing transparent and accurate testimony at all times during a regulatory process.”

The Ministry of Energy, which is responsible for B.C. Hydro, said in a statement it accepts all of the BCUC recommendations and will include the findings as part of a review it is conducting into Hydro’s operations and finances, including its deferred operating costs for context, and regulatory oversight.

Dix, who is now grappling with complex IT project management in his Health Ministry, said the lessons learned by B.C. Hydro and outlined in the report are important.

“I think the report is useful reading on all those scores,” he said. “It’s a case study in what shouldn’t happen in a major IT project.”

 

 

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BC Hydro rates going up 3 per cent

BC Hydro Rate Freeze Rejection details the BCUC decision enabling a 3% rate increase, citing revenue requirements, debt, and capital costs, affecting electricity bills, with NDP government proposing lifeline rates and low-income relief.

 

Key Points

It is the BCUC ruling allowing a 3% BC Hydro rate hike, citing cost recovery, debt, and capital needs.

✅ BCUC rejects freeze; 3% increase proceeds April 1, 2018

✅ Rationale: cost recovery, debt, capital expenditures

✅ Relief: lifeline rate, $600 grants, winter payment plan

 

The B.C. Utilities Commission has rejected a request by the provincial government to freeze rates at BC Hydro for the coming year, meaning a pending rate increase of three percent will come into effect as higher BC Hydro rates on April 1, 2018.

BC Hydro had asked for the three per cent increase, aligning with a rate increase proposal that would add about $2 a month, but, last year, Energy Minister Michelle Mungall directed the Crown corporation to resubmit its request in order to meet an NDP election promise.

"After years of escalating electricity costs, British Columbians deserve a break on their bills," she said at the time.

However, the utilities commission found there was "insufficient regulatory justification to approve the zero per cent rate increase."

"Even these increases do not fully recover B.C. Hydro's forecast revenue requirement, which includes items such as operating costs, new capital expenditures and carrying costs on capital expenditures," the commission wrote in a news release.

Mungall said she was disappointed by the decision.

"We were always clear we were going to the BCUC. We need to respect the role the BCUC has here for the ratepayers and for the public. I'm very disappointed obviously with their decision."

Mungall blamed the previous government for leaving BC Hydro in a financial state where a rate freeze was ultimately not possible.

Last month, Moody's Investors Service calculated BC Hydro's total debt at $22 billion and said it was one of the province's two credit challenges going forward.

"There's quite a financial mess that is a B.C. Liberal legacy after 16 years of government. We have the responsibility as a new government to clean that up."

B.C. Liberal leader Andrew Wilkinson said it was an example of the new government not living up to its campaign promises.

"British Columbians, particularly those on fixed incomes, believed the B.C. NDP when they promised a freeze on hydro bills. They planned accordingly and are now left in the lurch and face higher expenses. This is a government that stumbles into messes that cost all of us because they put rhetoric ahead of planning," he said.

 

Help on the way?

With the freeze being rejected, Mungall said the government would be going forward on other initiatives to help low-income ratepayers, as advocates' call for change after a fund surplus, including:

Legislating a "lifeline rate" program, allowing people with "demonstrated need" to apply for a lower rate for electricity.

Starting in May, providing an emergency grant of $600 for customers who have an outstanding BC Hydro bill.

Hydro's annual winter payment plan also allows people the chance to spread the payment of bills from December to February out over six months, and, with a two-year rate increase on the horizon, a new pilot program to help people paying their bills begins in July.

Mungall couldn't say whether the government would apply for rate freezes in the future.

"I don't have a crystal ball, and can't predict what might happen in two or three years from now, but we need to act swiftly now," she said.

"I appreciate the [BCUC's] rationale, I understand it, and we'll be moving forward with other alternatives for making life more affordable."

 

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Swiss Earthquake Service and ETH Zurich aim to make geothermal energy safer

Advanced Traffic Light System for Geothermal Safety models fracture growth and friction with rock physics, geophones, and supercomputers to predict induced seismicity during hydraulic stimulation, enabling real-time risk control for ETH Zurich and SED.

 

Key Points

ATLS uses rock physics, geophones, and HPC to forecast induced seismicity in real time during geothermal stimulation.

✅ Real-time seismic risk forecasts during hydraulic stimulation

✅ Uses rock physics, friction, and fracture modeling on HPC

✅ Supports ETH Zurich and SED field tests in Iceland and Bedretto

 

The Swiss Earthquake Service and ETH Zurich want to make geothermal energy safer, so news piece from Switzerland earlier this month. This is to be made possible by new software, including machine learning, and the computing power of supercomputers. The first geothermal tests have already been carried out in Iceland, and more will follow in the Bedretto laboratory.

In areas with volcanic activity, the conditions for operating geothermal plants are ideal. In Iceland, the Hellisheidi power plant makes an important contribution to sustainable energy use, alongside innovations like electricity from snow in cold regions.

Deep geothermal energy still has potential. This is the basis of the 2050 energy strategy. While the inexhaustible source of energy in volcanically active areas along fault zones of the earth’s crust can be tapped with comparatively little effort and, where viable, HVDC transmission used to move power to demand centers, access on the continents is often much more difficult and risky. Because the geology of Switzerland creates conditions that are more difficult for sustainable energy production.

Improve the water permeability of the rock

On one hand, you have to drill four to five kilometers deep to reach the correspondingly heated layers of earth in Switzerland. It is only at this depth that temperatures between 160 and 180 degrees Celsius can be reached, which is necessary for an economically usable water cycle. On the other hand, the problem of low permeability arises with rock at these depths. “We need a permeability of at least 10 millidarcy, but you can typically only find a thousandth of this value at a depth of four to five kilometers,” says Thomas Driesner, professor at the Institute of Geochemistry and Petrology at ETH Zurich.

In order to improve the permeability, water is pumped into the subsurface using the so-called “fracture”. The water acts against friction, any fracture surfaces shift against each other and tensions are released. This hydraulic stimulation expands fractures in the rock so that the water can circulate in the hot crust. The fractures in the earth’s crust originate from tectonic tensions, caused in Switzerland by the Adriatic plate, which moves northwards and presses against the Eurasian plate.

In addition to geothermal energy, the “Advanced Traffic Light System” could also be used in underground construction or in construction projects for the storage of carbon dioxide.

Quake due to water injection

The disadvantage of such hydraulic stimulations are vibrations, which are often so weak or cannot be perceived without measuring instruments. But that was not the case with the geothermal projects in St. Gallen 2013 and Basel 2016. A total of around 11,000 cubic meters of water were pumped into the borehole in Basel, causing the pressure to rise. Using statistical surveys, the magnitudes 2.4 and 2.9 defined two limit values ??for the maximum permitted magnitude of the earthquakes generated. If these are reached, the water supply is stopped.

In Basel, however, there was a series of vibrations after a loud bang, with a time delay there were stronger earthquakes, which startled the residents. In both cities, earthquakes with a magnitude greater than 3 have been recorded. Since then it has been clear that reaching threshold values ??determines the stop of the water discharge, but this does not guarantee safety during the actual drilling process.

Simulation during stimulation

The Swiss Seismological Service SED and the ETH Zurich are now pursuing a new approach that can be used to predict in real time, building on advances by electricity prediction specialists in Europe, during a hydraulic stimulation whether noticeable earthquakes are expected in the further course. This is to be made possible by the so-called “Advanced Traffic Light System” based on rock physics, a software developed by the SED, which carries out the analysis on a high-performance computer.

Geophones measure the ground vibrations around the borehole, which serve as indicators for the probability of noticeable earthquakes. The supercomputer then runs through millions of possible scenarios, similar to algorithms to prevent power blackouts during ransomware attacks, based on the number and type of fractures to be expected, the friction and tensions in the rock. Finally, you can filter out the scenario that best reflects the underground.

Further tests in the mountain

However, research is currently still lacking any real test facility for the system, because incorrect measurements must be eliminated and a certain data format adhered to before the calculations on the supercomputer. The first tests were carried out in Iceland last year, with more to follow in the Bedretto geothermal laboratory in late summer, where reliable backup power from fuel cell solutions can keep instrumentation running. An optimum can now be found between increasing the permeability of rock layers and an adequate water supply.

The new approach could make geothermal energy safer and ultimately help this energy source to become more accepted, while grid upgrades like superconducting cables improve efficiency. Research also sees areas of application wherever artificially caused earthquakes can occur, such as in underground mining or in the storage of carbon dioxide underground.

 

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Is tidal energy the surge remote coastal communities need?

BC Tidal Energy Micro-Grids harness predictable tidal currents to replace diesel in remote Indigenous coastal communities, integrating marine renewables, storage, and demand management for resilient off-grid power along Vancouver Island and Haida Gwaii.

 

Key Points

Community-run tidal turbines and storage deliver reliable, diesel-free electricity to remote B.C. coastal communities.

✅ Predictable power from tidal currents reduces diesel dependence

✅ Integrates storage, demand management, and microgrid controls

✅ Local jobs via marine supply chains and community ownership

 

Many remote West Coast communities are reliant on diesel for electricity generation, which poses a number of negative economic and environmental effects.

But some sites along B.C.’s extensive coastline are ideal for tidal energy micro-grids that may well be the answer for off-grid communities to generate clean power, suggested experts at a COAST (Centre for Ocean Applied Sustainable Technologies) virtual event Wednesday.

There are 40 isolated coastal communities, many Indigenous communities, and 32 of them are primarily reliant on diesel for electricity generation, said Ben Whitby, program manager at PRIMED, a marine renewable energy research lab at the University of Victoria (UVic).

Besides being a costly and unreliable source of energy, there are environmental and community health considerations associated with shipping diesel to remote communities and running generators, Whitby said.

“It's not purely an economic question,” he said.

“You've got the emissions associated with diesel generation. There's also the risks of transporting diesel … and sometimes in a lot of remote communities on Vancouver Island, when deliveries of diesel don't come through, they end up with no power for three or four days at a time.”

The Heiltsuk First Nation, which suffered a 110,000-litre diesel spill in its territorial waters in 2016, is an unfortunate case study for the potential environmental, social, and cultural risks remote coastal communities face from the transport of fossil fuels along the rough shoreline.

A U.S. barge hauling fuel for coastal communities in Alaska ran aground in Gale Pass, fouling a sacred and primary Heiltsuk food-harvesting area.

There are a number of potential tidal energy sites near off-grid communities along the mainland, on both sides of Vancouver Island, and in the Haida Gwaii region, Whitby said.

Tidal energy exploits the natural ebb and flow of the coast’s tidal water using technologies like underwater kite turbines to capture currents, and is a highly predictable source of renewable energy, he said.

Micro-grids are self-reliant energy systems drawing on renewables from ocean, wave power resources, wind, solar, small hydro, and geothermal sources.

The community, rather than a public utility like BC Hydro, is responsible for demand management, storage, and generation with the power systems running independently or alongside backup fuel generators — offering the operators a measure of energy sovereignty.

Depending on proximity, cost, and renewable solutions, tidal energy isn’t necessarily the solution for every community, Whitby noted, adding that in comparison to hydro, tidal energy is still more expensive.

However, the best candidates for tidal energy are small, off-grid communities largely dependent on costly fossil fuels, Whitby said.

“That's really why the focus in B.C. is at a smaller scale,” he said.

“The time it would take (these communities) to recoup any capital investment is a lot shorter.

“And the cost is actually on a par because they're already paying a significant amount of money for that diesel-generated power.”

Lisa Kalynchuk, vice-president of research and innovation at UVic, said she was excited by the possibilities associated with tidal power, not only in B.C., but for all of Canada’s coasts.

“Canada has approximately 40,000 megawatts available on our three coastlines,” Kalynchuk said.

“Of course, not all this power can be realized, but it does exist, so that leads us to the hard part — tapping into this available energy and delivering it to those remote communities that need it.”

Challenges to establishing tidal power include the added cost and complexity of construction in remote communities, the storage of intermittent power for later use, the economic model, though B.C.’s streamlined regulatory process may ease approvals, the costs associated with tidal power installations, and financing for small communities, she said.

But smaller tidal energy projects can potentially set a track record for more nascent marine renewables, as groups like Marine Renewables Canada pivot to offshore wind development, at a lower cost and without facing the same social or regulatory resistance a large-scale project might face.

A successful tidal energy demo project was set up using a MAVI tidal turbine in Blind Channel to power a private resort on West Thurlow Island, part of the outer Discovery Islands chain wedged between Vancouver Island and the mainland, Whitby said.

The channel’s strong tidal currents, which routinely reach six knots and are close to the marina, proved a good site to test the small-scale turbine and associated micro-grid system that could be replicated to power remote communities, he said.

The mooring system, cable, and turbine were installed fairly rapidly and ran through the summer of 2017. The system is no longer active as provincial and federal funding for the project came to an end.

“But as a proof of concept, we think it was very successful,” Whitby said, adding micro-grid tidal power is still in the early stages of development.

Ideally, the project will be revived with new funding, so it can continue to act as a test site for marine renewable energy and to showcase the system to remote coastal communities that might want to consider tidal power, he said.

In addition to harnessing a local, renewable energy source and increasing energy independence, tidal energy micro-grids can fuel employment and new business opportunities, said Whitby.

The Blind Channel project was installed using the local supply chain out of nearby Campbell River, he said.

“Most of the vessels and support came from that area, so it was all really locally sourced.”

Funding from senior levels of government would likely need to be provided to set up a permanent tidal energy demonstration site, with recent tidal energy investments in Nova Scotia offering a model, or to help a community do case studies and finance a project, Whitby said.

Both the federal and provincial governments have established funding streams to transition remote communities away from relying on diesel.

But remote community projects funded federally or provincially to date have focused on more established renewables, such as hydro, solar, biomass, or wind.

The goal of B.C.’s Remote Community Energy Strategy, part of the CleanBC plan and aligned with zero-emissions electricity by 2035 targets across Canada, is to reduce diesel use for electricity 80 per cent by 2030 by targeting 22 of the largest diesel locations in the province, many of which fall along the coast.

The province has announced a number of significant investments to shift Indigenous coastal communities away from diesel-generated electricity, but they predominantly involve solar or hydro projects.

A situation that’s not likely to change, as the funding application guide in 2020 deemed tidal projects as ineligible for cash.

Yet, the potential for establishing tidal energy micro-grids in B.C. is good, Kalynchuk said, noting UVic is a hub for significant research expertise and several local companies, including ocean and river power innovators working in the region, are employing and developing related service technologies to install and maintain the systems.

“It also addresses our growing need to find alternative sources of energy in the face of the current climate crisis,” she said.

“The path forward is complex and layered, but one essential component in combating climate change is a move away from fossil fuels to other sources of energy that are renewable and environmentally friendly.”

 

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UK electricity and gas networks making ‘unjustified’ profits

UK Energy Network Profits are under scrutiny as Ofgem price controls, Citizens Advice claims, and National Grid margins spark debate over monopolies, allowed returns, consumer bills, rebates, and future investment under tougher regulation.

 

Key Points

UK Energy Network Profits are returns set by Ofgem for regulated grid operators, shaping consumer bills and investment

✅ Ofgem sets allowed returns for monopoly networks via price controls

✅ Dispute over interest rates, bond yields, and risk premiums

✅ Reforms proposed: shorter controls, tougher investor incentives

 

Companies that run Britain’s electricity and gas networks, including National Grid, are making “eye-watering” profits at the expense of households, according to a well-known consumer group.

Citizens Advice believes £7.5bn in “unjustified” profits should be returned to consumers who pay for network costs via their electricity and gas bills, with parallels seen in a deferred BC Hydro costs report abroad, although its figures have been contested by the energy industry and regulator.

Ownership of electricity and gas networks came under the spotlight in the run-up to June’s general election, after the Labour party said in its manifesto it would bring both national and regional grid infrastructure to back into public ownership, amid wider debates about grid privatization concerns elsewhere, over time.

Electricity sector privatisation began in 1990 and the gas industry was privatised in 1986. Energy network companies — which own and operate the cables and wires that help deliver electricity and gas to homes and businesses — are in effect monopolies that are regulated by Ofgem. Ofgem evaluates what their costs, including the cost of capital to finance investments, might be over an eight-year “price control” period, similar to determinations like the OEB decision on Hydro One rates in Ontario, Canada. Citizens Advice claims many of the regulator’s calculations for the most recent price control went “considerably in networks’ financial favour”.

It believes assumptions Ofgem made about factors such as the future path of interest rates and returns on government bonds were too generous, with international contrasts like power theft challenges in India illustrating different risk contexts, as was the regulator’s assessment of the risk associated with operating a network company. 

These “generous” assumptions will lead to network companies making average profit margins of 19 per cent and an average return of 10 per cent for their investors at the expense of consumers, Citizens Advice claims in a report published on Wednesday, which recommends a shorter price control period to allow for more accurate forecasting.

“Decisions made by Ofgem have allowed gas and electricity network companies to make sky-high profits that we’ve found are not justified by their performance,” said Gillian Guy, chief executive of Citizens Advice. Ofgem defended its regulatory regime, saying it helped to cut costs, improve reliability and customer satisfaction. 

“Ofgem has already cut costs to consumers by 6 per cent in the current price control and secured a rebate of over £4.5bn from network companies and is engaging with the industry to deliver further savings, with some regions seeing Ontario electricity rate reductions for businesses as well,” said Dermot Nolan, chief executive of the energy regulator.

Mr Nolan insisted the next price controls would be “tougher for investors”. The current price controls for the gas and electricity transmission networks, plus gas distribution, run until 2021 and until 2023 for local electricity distribution networks.

“While we don’t agree with its modelling and the figures it has produced, the Citizens Advice report raises some important issues about network regulation which will be addressed in the next control,” Mr Nolan said.

The Energy Networks Association, a trade body, refuted the claims of Citizens Advice, insisting that costs had fallen by 17 per cent in real terms since privatisation. The current regulatory framework was established after a public consultation, it said, adding that today’s report repeated several old claims that had previously been rejected by the Competition and Markets Authority.

“Our energy networks are among the most reliable and lowest cost in the world and their performance has never been better. In the next six years energy network companies are forecasted to deliver £45bn of investment in the UK economy,” a spokesman for the networks association added. National Grid said that since 2013 it had generated savings of £460m for bill payers.

 

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