German renewables law under scrutiny

By United Press International


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A study claims Germany's renewable energy funding law - copied by countries all over the world - is too expensive and ineffective.

Germany's famous EEG law has "failed to harness the market incentives needed to ensure a viable and cost-effective introduction of renewable energies into the country's energy portfolio," says the study published by RWI, an Essen-based economic think tank. "To the contrary: The government's support mechanisms have in many respects subverted these incentives, resulting in massive expenditures that show little long-term promise for stimulating the economy, protecting the environment, or increasing energy security."

Thanks to a lucrative feed-in tariff, Germany has the world's second-largest wind power market and tops the globe when it comes to installed solar energy capacity.

The study nevertheless singles out solar power for what it says is government support gone wrong: Berlin subsidizes a worker in the photovoltaic industry with up to $240,000 and pays $0.59 per kwH of solar power - roughly eight times the wholesale electricity price. PV modules installed between 2000 and 2010 will cost Berlin $73.2 billion, the RWI study says.

The study says this ambitious government spending scheme hasn't translated into enough ecological success: "The amount of electricity produced through solar photovoltaics was a negligible 0.6 percent despite being the most subsidized renewable energy," the study says.

Customers, the study continues, bear the cost of renewable energy promotion.

"In 2008, the price mark-up due to the subsidization of green electricity was about 2.2 cents, meaning the subsidy accounts for about 7.5 percent of average household electricity prices."

The German Environment Ministry has already issued a harsh counter-statement to the study, which contains "no new arguments," Berlin claims.

Renewable energy sources promoted by the EEG in 2008 alone saved 53 million tons of CO2 emissions, the ministry said. It also said that several German companies are among the best performers in the global wind and PV markets.

Claudia Kemfert, a leading German energy expert, also criticized the study's black-white approach.

"Nuclear energy was subsidized with $60 billion, German lignite with nearly $200 billion," she told German newspaper taz. "Energy supply is important, and one should support new technologies. The future belongs to solar. The market will boom and German suppliers will have a competitive edge."

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Energy authority clears TEPCO to restart Niigata nuclear plant

TEPCO Kashiwazaki-Kariwa restart plan clears NRA fitness review, anchored by a seven-point safety code, Niigata consent, Fukushima lessons, seismic risk analysis, and upgrades to No. 6 and No. 7 reactors, each rated 1.35 GW.

 

Key Points

TEPCO's plan to restart Kashiwazaki-Kariwa under NRA rules, pending Niigata consent and upgrades to Units 6 and 7.

✅ NRA deems TEPCO fit; legally binding seven-point safety code

✅ Local consent required: Niigata review of evacuation and health impacts

✅ Initial focus on Units 6 and 7; 1.35 GW each, seismic upgrades

 

Tokyo Electric Power Co. cleared a major regulatory hurdle toward restarting a nuclear power plant in Niigata Prefecture, but the utility’s bid to resume its operations still hangs in the balance of a series of political approvals.

The government’s nuclear watchdog concluded Sept. 23 that the utility is fit to operate the plant, based on new legally binding safety rules TEPCO drafted and pledged to follow, even as nuclear projects worldwide mark milestones across different regulatory environments today. If TEPCO is found to be in breach of those regulations, it could be ordered to halt the plant’s operations.

The Nuclear Regulation Authority’s green light now shifts the focus over to whether local governments will agree in the coming months to restart the Kashiwazaki-Kariwa plant.

TEPCO is keen to get the plant back up and running. It has been financially reeling from the closure of its nuclear plants in Fukushima Prefecture following the triple meltdown at the Fukushima No. 1 nuclear plant in 2011 triggered by the earthquake and tsunami disaster.

In parallel, Japan is investing in clean energy innovations such as a large hydrogen system being developed by Toshiba, Tohoku Electric Power and Iwatani.

The company plans to bring the No. 6 and No. 7 reactors back online at the Kashiwazaki-Kariwa nuclear complex, which is among the world’s largest nuclear plants, amid China’s nuclear energy continuing on a steady development track in the region.

The two reactors each boast 1.35 gigawatts in output capacity, while Kenya’s nuclear plant aims to power industry as part of that country’s expansion. They are the newest of the seven reactors there, first put into service between 1996 and 1997.

TEPCO has not revealed specific plans yet on what to do with the older five reactors.

In 2017, the NRA cleared the No. 6 and No. 7 reactors under the tougher new reactor regulations established in 2013 in response to the Fukushima nuclear disaster, while jurisdictions such as Ontario support continued operation at Pickering under strict oversight.

It also closely scrutinized the operator’s ability to run the Niigata Prefecture plant safely, given its history as the entity responsible for the nation’s most serious nuclear accident.

After several rounds of meetings with top TEPCO managers, the NRA managed to hold the utility’s feet to the fire enough to make it pledge, in writing, to abide by a new seven-point safety code for the Kashiwazaki-Kariwa plant.

The creation of the new code, which is legally binding, is meant to hold the company accountable for safety measures at the facility.

“As the top executive, the president of TEPCO will take responsibility for the safety of nuclear power,” one of the points reads. “TEPCO will not put the facility’s economic performance above its safety,” reads another.

The company promised to abide by the points set out in writing during the NRA’s examination of its safety regulations.

TEPCO also vowed to set up a system where the president is directly briefed on risks to the nuclear complex, including the likelihood of earthquakes more powerful than what the plant is designed to withstand. It must also draft safeguard measures to deal with those kinds of earthquakes and confirm whether precautionary steps are in place.

The utility additionally pledged to promptly release public records on the decision-making process concerning crucial matters related to nuclear safety, and to preserve the documents until the facility is decommissioned.

TEPCO plans to complete its work to reinforce the safety of the No. 7 reactor in December. It has not set a definite deadline for similar work for the No. 6 reactor.

To restart the Kashiwazki-Kariwa plant, TEPCO needs to obtain consent from local governments, including the Niigata prefectural government.

The prefectural government is studying the plant’s safety through a panel of experts, which is reviewing whether evacuation plans are adequate as off-limits areas reopen and the health impact on residents from the Fukushima nuclear disaster.

Niigata Governor Hideyo Hanazumi said he will not decide on the restart until the panel completes its review.

The nuclear complex suffered damage, including from fire at an electric transformer, when an earthquake it deemed able to withstand hit in 2007.

 

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USAID Delivers Mobile Gas Turbine Power Plant to Ukraine

USAID GE Mobile Power Plant Ukraine supplies 28MW of emergency power and distributed generation to bolster energy security, grid resilience, and critical infrastructure reliability across cities and regions amid ongoing attacks.

 

Key Points

A 28MW GE gas turbine from USAID providing mobile, distributed power to strengthen Ukraine's grid resilience.

✅ 28MW GE gas turbine; power for 100,000 homes

✅ Mobile deployment to cities and regions as needed

✅ Supports hospitals, schools, and critical infrastructure

 

Deputy U.S. Administrator Isobel Coleman announced during her visit to Kyiv that the U.S. Agency for International Development (USAID) has provided the Government of Ukraine with a mobile gas turbine power plant purchased from General Electric (GE), as discussions of a possible agreement on power plant attacks continue among stakeholders.

The mobile power plant was manufactured in the United States by GE’s Gas Power business and has a total output capacity of approximately 28MW, which is enough to provide the equivalent electricity to at least 100,000 homes. This will help Ukraine increase the supply of electricity to homes, hospitals, schools, critical infrastructure providers, and other institutions, as the country has even resumed electricity exports in recent months. The mobile power plant can be operated in different cities or regions depending on need, strengthening Ukraine’s energy security amid the Russian Federation’s continuing strikes against critical infrastructure.   

Since the February 2022 full-scale invasion of Ukraine, and particularly since October 2022, the Russian Federation has deliberately targeted critical civilian heating, power, and gas infrastructure in an effort to weaponize the winter, raising nuclear risks to grid stability noted by international monitors. Ukraine has demonstrated tremendous resilience in the wake of these attacks, with utility workers routinely risking their lives to repair the damage, often within hours of air strikes, even as Russia builds power lines to reactivate the Zaporizhzhia plant to influence the energy situation.

The collaboration between USAID and GE reflects the U.S. government’s emphasis on engaging American private sector expertise and procuring proven and reliable equipment to meet Ukraine’s needs. Since the start of Putin’s full-scale war against Ukraine, USAID has both directly procured equipment for Ukraine from American companies and engaged the private sector in partnerships to meet Ukraine’s urgent wartime needs, with U.S. policy debates such as a proposal on Ukraine’s nuclear plants drawing scrutiny.

This mobile power plant is the latest example of USAID assistance to Ukraine’s energy sector since the start of the Russian Federation’s full-scale invasion, during which Ukraine has resumed electricity exports as conditions improved. USAID has already delivered more than 1,700 generators to 22 oblasts across Ukraine, with many more on the way. These generators ensure electricity and heating for schools, hospitals, accommodation centers for internally-displaced persons, district heating companies, and water systems if and when power is knocked out by the Russian Federation’s relentless, systematic and cruel attacks against critical civil infrastructure. USAID has invested $55 million in Ukraine’s heating infrastructure to help the Ukrainian people get through winter. This support will benefit up to seven million Ukrainians by supporting repairs and maintenance of pipes and other equipment necessary to deliver heating to homes, hospitals, schools, and businesses across Ukraine. USAID’s assistance builds on over two decades of support to Ukraine to strengthen the country’s energy security, complementing growth in wind power that is harder to destroy.

 

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Hydro One CEO's $4.5M salary won't be reduced to help cut electricity costs

Hydro One CEO Salary shapes debate on Ontario electricity costs, executive compensation, sunshine list transparency, and public disclosure rules, as officials argue pay is not driving planned hydro rate cuts for consumers.

 

Key Points

Hydro One CEO pay disclosed in public filings, central to debates on Ontario electricity rates and transparency.

✅ 2016 compensation: $4.5M (salary + bonuses)

✅ Excluded from Ontario's sunshine list after privatization

✅ Government says pay won't affect planned hydro rate cuts

 

The $4.5 million in pay received by Hydro One's CEO is not a factor in the government's plan to cut electricity costs for consumers, an Ontario cabinet minister said Thursday amid opposition concerns about the executive's compensation and wider sector pressures such as Manitoba Hydro's rising debt in other provinces.

Treasury Board President Liz Sandals made her comments on the eve of the release of the province's so-called sunshine list.

The annual disclosure of public-sector salaries over $100,000 will be released Friday, but Hydro One salaries such as that of company boss Mayo Schmidt won't be on it.Though the government still owns most of Hydro One — 30 per cent has been sold — the company is required to follow the financial disclosure rules of publicly traded companies, which means disclosing the salaries of its CEO, CFO and next three highest-paid executives, and financial results such as a Q2 profit decline in filings.

New filings show that Schmidt was paid $4.5 million in 2016 — an $850,000 salary plus bonuses — and those top five executives were paid a total of about $11.7 million. 

"Clearly that's a very large amount," said Sandals. Sandals wouldn't say whether or not she thought the pay was appropriate at a time when the government is trying to reduce system costs and cut people's hydro bills.

Mayo Schmidt, President & CEO of Hydro One Limited and Hydro One Inc. (Hydro One )

But she suggested the CEO's salary was not a factor in efforts to bring down hydro prices, even as Hydro One shares fell after a leadership shakeup in a later period. "The CEO salary is not part of the equation of will 'we be able to make the cut,"' she said. "Regardless of what those salaries are, we will make a 25-per-cent-off cut." The cut coming this summer is actually an average of 17 per cent -- the 25-per-cent figure factors in an earlier eight-per-cent rebate.

NDP Leader Andrea Horwath, who has proposed to make hydro public again in Ontario, said the executive salaries are relevant to cutting hydro costs.

"All of this is cost of operating the electricity system, it's part of the operating of Hydro One and so of course those increased salaries are going to impact the cost of our electricity," she said.

Schmidt was appointed Aug. 31, 2015, and in the last four months of that year earned $1.3 million, but the former CEO was paid $745,000 in 2014. About 3,800 workers were paid over $100,000 that year, none of whom will be on the sunshine list this year.

Progressive Conservative energy critic Todd Smith has a private member's bill that would put Hydro One salaries back on the list, amid investor concerns about Hydro One that cite too many unknowns.

"The Wynne Liberals don't want the people of Ontario to know that their rates have helped create a new millionaire's club at Hydro One," Smith said. "Hydro One is still under the majority ownership of the public, but Premier Kathleen Wynne has removed these salaries from the public's watchful eye."

The previous sunshine list showed 115,431 people were earning more than $100,000 — an increase of nearly 4,000 people despite the fact 3,774 Hydro One workers were not on the list for the first time.

Tom Mitchell, the former CEO at Ontario Power Generation who resigned last summer, topped the 2015 list at $1.59 million.

 

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Modular nuclear reactors a 'long shot' worth studying, says Yukon gov't

Yukon SMR Feasibility Study examines small modular reactors as low-emissions nuclear power for Yukon's grid and remote communities, comparing costs, safety, waste, and reliability with diesel generation, renewables, and energy efficiency.

 

Key Points

An official assessment of small modular reactors as low-emission power options for Yukon's grid and remote sites.

✅ Compares SMR costs vs diesel, hydro, wind, and solar

✅ Evaluates safety, waste, fuel logistics, decommissioning

✅ Considers remote community loads and grid integration

 

The Yukon government is looking for ways to reduce the territory's emissions, and wondering if nuclear power is one way to go.

The territory is undertaking a feasibility study, and, as some developers note, combining multiple energy sources can make better projects, to determine whether there's a future for SMRs — small modular reactors — as a low-emissions alternative to things such as diesel power.

The idea, said John Streicker, Yukon's minister of energy, mines and resources, is to bring the SMRs into the Yukon to generate electricity.

"Even the micro ones, you could consider in our remote communities or wherever you've got a point load of energy demand," Streicker said. "Especially electricity demand."

For remote coastal communities elsewhere in Canada, tidal energy is being explored as a low-emissions option as well.

SMRs are nuclear reactors that use fission to produce energy, similar to existing large reactors, but with a smaller power capacity. The International Atomic Energy Agency (IAEA) defines reactors as "small" if their output is under 300 MW. A traditional nuclear power plant produces about three times as much power or more.

They're "modular" because they're designed to be factory-assembled, and then installed where needed. 

Several provinces have already signed an agreement supporting the development of SMRs, and in Alberta's energy mix that conversation spans both green and fossil power, and Canada's first grid-scale SMRs could be in place in Ontario by 2028 and Saskatchewan by 2032.

A year ago, the government of Yukon endorsed Canada's SMR action plan, at a time when analysts argue that zero-emission electricity by 2035 is practical and profitable, agreeing to "monitor the progress of SMR technologies throughout Canada with the goal of identifying potential for applicability in our northern jurisdiction."

The territory is now following through by hiring someone to look at whether SMRs could make sense as a cleaner-energy alternative in Yukon. 

The territorial government has set a goal of reducing emissions by 45 per cent by 2030, excluding mining emissions, even as some analyses argue that zero-emissions electricity by 2035 is possible, and "future emissions actions for post-2030 have not yet been identified," reads the government's request for proposals to do the SMR study. 

Streicker acknowledges the potential for nuclear power in Yukon is a bit of "long shot" — but says it's one that can't be ignored.

"We need to look at all possible solutions," he said, as countries such as New Zealand's electricity sector debate their future pathways.

"I don't want to give the sense like we're putting all of our emphasis and energy towards nuclear power. We're not."

According to Streicker, it's nothing more than a study at this point.

Don't bother, researcher says
Still, M.V. Ramana, a professor at the School of Public Policy and Global Affairs at the University of British Columbia, said it's a study that's likely a waste of time and money. He says there's been plenty of research already, and to him, SMRs are just not a realistic option for Yukon or anywhere in Canada.

"I would say that, you know, that study can be done in two weeks by a graduate student, essentially, all right? They just have to go look at the literature on SMRs and look at the critical literature on this," Ramana said.

Ramana co-authored a research paper last year, looking at the potential for SMRs in remote communities or mine sites. The conclusion was that SMRs will be too expensive and there won't be enough demand to justify investing in them.

He said nuclear reactors are expensive, which is why their construction has "dried up" in much of the world.

"They generate electricity at very high prices," he said.

'They just have to go look at the literature,' said M.V. Ramana, a professor at the School of Public Policy and Global Affairs at the University of British Columbia. (Paul Joseph)
"[For] smaller reactors, the overall costs go down. But the amount of electricity that they will generate goes down even further."

The environmental case is also shaky, according to a statement signed last year by dozens of Canadian environmental and community groups, including the Sierra Club, Greenpeace, the Council of Canadians and the Canadian Environmental Law Associaton (CELA). The statement calls SMRs a "dirty, dangerous distraction" from tackling climate change and criticized the federal government for investing in the technology.

"We have to remember that the majority of the rhetoric we hear is from nuclear advocates. And so they are promoting what I would call, and other legal scholars and academics have called, a nuclear fantasy," said Kerrie Blaise of CELA.

Blaise describes the nuclear industry as facing an unknown future, with some of North America's larger reactors set to be decommissioned in the coming years. SMRs are therefore touted as the future.

"They're looking for a solution. And so that I would say climate change presents that timely solution for them."

Blaise argues the same safety and environmental questions exist for SMRs as for any nuclear reactors — such as how to produce and transport fuel safely, what to do with waste, and how to decommission them — and those can't be glossed over in a single-minded pursuit of lower carbon emissions.  

Main focus is still renewables, minister says
Yukon's energy minister agrees, and he's eager to emphasize that the territory is not committed to anything right now beyond a study.

"Every government has a responsibility to do diligence around this," Streicker said.

A solar farm in Old Crow, Yukon. The territory's energy minister says Yukon is still primarily focussed on renewables, and energy efficiency. (Caleb Charlie)
He also dismisses the idea that studying nuclear power is any sort of distraction from his government's response to climate change right now. Yukon's main focus is still renewable energy such as solar and wind power, though Canada's solar progress is often criticized as lagging, increasing efficiency, and connecting Yukon's grid to the hydro project in Atlin, B.C., he said.

Streicker has been open to nuclear energy in the past. As a federal Green Party candidate in 2008, Streicker broke with the party line to suggest that nuclear could be a viable energy alternative. 

He acknowledges that nuclear power is always a hot-button issue, and Yukoners will have strong feelings about it. A lot will depend on how any future regulatory process works, he says.

In taking action on climate, this Arctic community wants to be a beacon to the world
Cameco signs agreement with nuclear reactor company
"There's some people that think it's the 'Hail Mary,' and some people that think it's evil incarnate," he said. 

"Buried deep within Our Clean Future [Yukon's climate change strategy], there's a line in there that says we should keep an eye on other technologies, for example, nuclear. That's what this [study] is — it's to keep an eye on it."

 

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Attacks on power substations are growing. Why is the electric grid so hard to protect?

Power Grid Attacks surge across substations and transmission lines, straining critical infrastructure as DHS and FBI cite vandalism, domestic extremists, and cybersecurity risks impacting resilience, outages, and grid reliability nationwide.

 

Key Points

Power Grid Attacks are deliberate strikes on substations and lines to disrupt power and weaken grid reliability.

✅ Physical attacks rose across multiple states and utilities.

✅ DHS and FBI warn of threats to critical infrastructure.

✅ Substation security and grid resilience upgrades urged.

 

Even before Christmas Day attacks on power substations in five states in the Pacific Northwest and Southeast, similar incidents of attacks, vandalism and suspicious activity were on the rise.

Federal energy reports through August – the most recent available – show an increase in physical attacks at electrical facilities across the nation this year, continuing a trend seen since 2017.

At least 108 human-related events were reported during the first eight months of 2022, compared with 99 in all of 2021 and 97 in 2020. More than a dozen cases of vandalism have been reported since September.

The attacks have prompted a flurry of calls to better protect the nation's power grid, with a renewed focus on protecting the U.S. power grid across sectors, but experts have warned for more than three decades that stepped-up protection was needed.

Attacks on power stations on the rise 
Twice this year, the Department of Homeland Security warned "a heightened threat environment" remains for the nation, including its critical infrastructure amid reports of suspected Russian breaches of power plant systems. 

At least 20 actual physical attacks were reported, compared with six in all of 2021. 
Suspicious-activity reports jumped three years ago, nearly doubling in 2020 to 32 events. In the first eight months of this year, 34 suspicious incidents were reported.
Total human-related incidents – including vandalism, suspicious activity and cyber events such as Russian hackers and U.S. utilities in recent years – are on track to be the highest since the reports started showing such activity in 2011.


Attacks reported in at least 5 states
Since September, attacks or potential attacks have been reported on at least 18 additional substations and one power plant in Florida, Oregon, Washington and the Carolinas. Several involved firearms.

  • In Florida: Six "intrusion events" occurred at Duke Energy substations in September, resulting in at least one brief power outage, according to the News Nation television network, which cited a report the utility sent to the Energy Department. Duke Energy spokesperson Ana Gibbs confirmed a related arrest, but the company declined to comment further.
  • In Oregon and Washington state: Substations were attacked at least six times in November and December, with firearms used in some cases, local news outlets reported. On Christmas Day, four additional substations were vandalized in Washington State, cutting power to more than 14,000 customers.
  • In North Carolina: A substation in Maysville was vandalized on Nov. 11. On Dec. 3, shootings that authorities called a "targeted attack" damaged two power substations in Moore County, leaving tens of thousands without power amid freezing temperatures.
  • In South Carolina: Days later, gunfire was reported near a hydropower plant, but police said the shooting was a "random act."

It's not yet clear whether any of the attacks were coordinated. After the North Carolina attacks, a coordinating council between the electric power industry and the federal government ordered a security evaluation.


FBI mum on its investigations
The FBI is looking into some of the attacks, including cyber intrusions where hackers accessed control rooms in past cases, but it hasn't said how many it's investigating or where. 

Shelley Lynch, a spokesperson for the FBI's Charlotte field office, confirmed the bureau was investigating the North Carolina attack. The Kershaw County Sheriff's Office reported the FBI was looking into the South Carolina incident.

Utilities in Oregon and Washington told news outlets they were cooperating with the FBI, but spokespeople for the agency's Seattle and Portland field offices said they couldn't confirm or deny an investigation.

Could domestic extremists be involved?
In January, the Department of Homeland Security said domestic extremists had been developing "credible, specific plans" since at least 2020, including a Neo-Nazi plot against power stations detailed in a federal complaint, and would continue to "encourage physical attacks against electrical infrastructure."

In February, three men who ascribed to white supremacy and Neo-Nazism pleaded guilty to federal crimes related to a scheme to attack the grid with rifles.

In a news release, Timothy Langan, assistant director of the FBI’s Counterterrorism Division, said the defendants "wanted to attack regional power substations and expected the damage would lead to economic distress and civil unrest."

 

Why is the power grid so hard to protect?
Industry experts, federal officials and others have warned in one report after another since at least 1990 that the power grid was at risk, and a recent grid vulnerability report card highlights dangerous weak points, said Granger Morgan, an engineering professor at Carnegie Mellon University who chaired three National Academies of Sciences reports.

The reports urged state and federal agencies to collaborate to make the system more resilient to attacks and natural disasters such as hurricanes and storms. 

"The system is inherently vulnerable, with the U.S. grid experiencing more blackouts than other developed nations in one study. It's spread all across the countryside," which makes the lines and substations easy targets, Morgan said. The grid includes more than 7,300 power plants, 160,000 miles of high-voltage power lines and 55,000 transmission substations.

One challenge is that there's no single entity whose responsibilities span the entire system, Morgan said. And the risks are only increasing as the grid expands to include renewable energy sources such as solar and wind, he said. 

 

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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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