UK energy bosses warned that £100 billion of planned sector investment risked being undermined by a suite of new government policies which seek to cap both consumer bills and generator earnings.
In a 21 October letter written to Business and Energy Secretary Jacob Rees-Mogg and seen by Energy Voice, business leaders warned that proposals contained in the government’s Energy Prices Bill “threaten to undermine the long-established principle of strong, independent regulation of the energy sector.”
Signatories to the letter, which include Energy UK chairman Lord Hutton and the heads of energy giants such as SSE, EON, ScottishPower, Centrica, RWE and Uniper, said they were “alarmed” to see clauses contained within the Bill that propose “extensive new powers” for ministers in relation to the regulation of the sector.
It follows a series of policy announcements aimed at curbing rising energy costs for consumers and businesses.
However, recent additions to the Bill include a proposal to enact a “cost-plus revenue limit” capping the amount green energy generators can make.
The energy sector has already decried the measures, which it said would act as a “de-facto windfall tax”.
Friday’s letter says the revenue limits are significant enough on their own to jeopardise the £100bn in planned investment energy investment up to 2030.
However, it pointed to the “concerning” potential for market interventions, including giving the Secretary of State powers to intervene to extend duration and intervene in the level of the Default Tariff Cap, and powers to modify licenses and issue directions
This, the signatories said, “has the potential to impact just about everything energy companies do on an indefinite basis.”
“As it stands the Bill would offer no protection from any resulting financial implications for companies from following such directions, and little in the way of checks and balances typically seen in regulated markets.”
“We therefore urge the Government to take on board these concerns and act accordingly,” it concludes.
‘Proper scrutiny’ prevented
Introduced on October 12, the Bill is currently at the committee stage in the House of Lords, having already cleared the Commons.
It goes on to say that said the speed of its progress “prevents proper scrutiny of changes with long-standing and profound consequences for the energy sector.”
They call for its contents to be “reconsidered and amended” so that it focuses solely on ensuring support for household and businesses over the winter.
The letter reiterates that the sector’s mooted £100bn investment is dependent on a “strong, stable regulatory environment.”
In the meantime, the authors said they wished to underline a continuing commitment to work with Ofgem and the government to navigate “the next difficult six months and beyond”.
Energy UK has been approached for comment.