ENA Bulletin 2 November

Issue 280: Wednesday 2 November 2011

  • ENA address Ministers on metal theft 

  • ENA at the SNP Conference

  • ENA messages reflected in MPs report on energy security

  • ENA support Gas safety launch • Government ruffles feathers over Solar PV

  • Brussels update

  • Forthcoming events organised and/or supported by ENA

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ENA address Ministers on metal theft

ENA set out the case for a change to the scrap metal laws to remove the scourge of metal theft at a meeting of seven departmental Ministers yesterday. The meeting, convened by Home Office Crime Minister Lord Henley and attended by among others Charles Hendry and Lord Taylor of Holbeach as well as Ministers from the Treasury and the Department for Transport, aimed to look at the case for changing the scrap metal law.

ENA made clear that protecting the plethora of energy infrastructure across the UK from metal theft is an impossible task. There are more than 88,000 pylons and over 430,000 substations in the UK. The cost of security measures for network companies is estimated at £12m per year. Even if this was tripled it will still not prevent metal theft.

The cost to the public

Deloitte recently estimated that the total estimated cost of the impact of metal theft to the energy networks (direct and indirect) was up to £60m.

Parliament demand a response

Currently with one Private Members Bill in the Lords and one coming shortly in the Commons, as well as an Early Day Motion and a host of Parliamentary Questions it is clear that Parliament wants to see change.

People still dying

A man attempting to steal copper was severely burned only this week and is currently in a life threatening condition in hospital in Newcastle. In July a 16-year-old boy was killed trying to steal copper from a substation in Leeds. Sooner or later an innocent person is going to be killed – then people will ask why the Government did nothing when they had the chance. 

It was clear that the Ministers present took the issue very seriously. It is now the time for them to do something about it. _______________________________________

ENA at the SNP Conference

Last week ENA attended the 2011 Scottish National Party Conference held in the north of Scotland at Inverness. This was their first Conference since becoming a majority Government in Scotland in May this year.

We met, among others, the new Energy Minister Fergus Ewing and the new Transport Minister Keith Brown.

We have already met Fergus and will be briefing him tomorrow in Edinburgh on the future role of gas (more in the next edition of the Bulletin). However, last week we focused on the issue of metal theft. Fergus said that our briefing could not have come at a more appropriate time as he was becoming increasingly aware of the problem. Scotland has stronger legislation on regulating scrap metal dealers and this is reflected in the fact that despite high levels of poverty north of the border, incidents of metal theft are considerably lower than just south of the border.

Fergus stated he would be happy to support our campaign to change the law in England and Wales and look at ensuring that the Scottish legislation matched whatever is finally proposed.

He also said he had regular contact with Charles Hendry, the UK Energy Minister. It was clear that the very positive relationship that existed with Fergus’ predecessor Jim Mather and Charles has endured. He added that he would also raise the metal theft issue with the UK Energy Minister.

We also met Keith Brown and asked him about his view on street works legislation. The Scottish experience has been more positive on this issue than down south but Mr Brown confirmed that he was focussing on reinstatements and had asked the Scottish Street Works Commissioner John Gooday to look at this issue. He told ENA that whilst he understood the burden that increasing regulation placed on businesses he was keen to pursue this issue. It is clear that this was an area he was not going to go easy on in the future.

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ENA messages reflected in MPs report on energy security

ENA’s case for the vital future role for gas was accepted last week by MPs on the House of Commons Energy and Climate Change Select Committee. They set this out in a Report published last Monday following their Inquiry into Energy Security. Both ENA Chairman Steve Johnson and Steve Edwards from Wales & West Utilities gave evidence to the MPs. This meant that key messages on gas and a smarter electricity network were reflected in the Report.

It was reassuring to see this significant report recognising both the importance of an enduring role for gas and the critical role of empowering the public to be smarter in their energy usage. These were key to the evidence ENA provided the Committee. On the call for greater gas storage from the Committee, ENA responded that the ability to maintain a level of supply to meet demand, heat our homes and power energy intensive industries without the significant cost of infrastructure necessary for full electrification is dependent on a future for gas. We also agree with the Committee’s concerns that more needs to be done to encourage energy efficiency and welcome their suggestion of providing greater information to customers and more work to establish the attitudes towards‘ smart’ technologies. According to an ENA commissioned report by Imperial College London up to £16bn could be saved if we embrace smarter technologies.

The summary of our evidence to the Energy & Climate Change Select Committee given in June 2011 is available here.

The Imperial College London Report can be read here. 

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ENA support Carbon Monoxide safety launch

ENA, along with the Gas Industry Safety Group, converged on the House of Commons on Monday to celebrate the launch of a Report carried out by Baroness Finlay of Llandaff.

Over 4,000 people a year are poisoned by carbon monoxide. A colourless, odourless and tasteless gas, carbon monoxide can prove fatal in our homes, our workplace, or even the great outdoors.

The result of a six-month parliamentary inquiry, the report examines how we can mitigate the toll carbon monoxide poisoning takes on our health, our lives and the NHS budget.

Barry Sheerman MP is leading a debate in the House of Commons this afternoon on the issue.

Carbon monoxide can easily be produced. At home, the most common sources are faulty boilers or badly ventilated ovens. For Gas Emergency Services and Ambulance personnel, the workplace poses a hazard, and during our leisure time, the report points to the spate of camping incidents when individuals have taken barbecues into their tents causing fatalities.

The report by the All Party Parliamentary Gas Safety Group suggests that poisoning can be prevented if government, the health service and industry collaborate to raise awareness amongst the public, develop better regulation and improve detection.

For example, the report recommends that Government should remove VAT on all carbon monoxide alarms.

The report was launched at the same time as “Be Alarmed”, a national campaign to reduce the number of deaths and injuries caused by carbon monoxide. The campaign calls for every household to be fitted with an audible carbon monoxide alarm, an objective whose effectiveness is supported by the parliamentary inquiry.  

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Government ruffles feathers over Solar PV

The sun wasn’t shining on DECC Minister Greg Barker this week. At least that was the view of the Opposition. Mr Barker was forced to come to the Despatch Box on Monday to defend Government policy on feed-in-tariffs and Solar PV. The Minister said that with installed capacity nearly 3-times that projected by the last government when it launched the scheme 18 months ago, it all means that solar is burning through its budget at an unsustainable rate. “The generous pot of £867m secured for the feed-in tariff scheme by the coalition last year will be completely devoured if we don't act now” he warned.

He said he still believed “passionately that feed-in tariffs are essential”. But there was “a delicate balancing act to perform to avoid the boom and bust already experienced in countries such as Italy, Spain and France, fuelled by over-generous subsidy”. He explained that the challenge we face is to use that public investment to obtain the widest possible deployment. “I don't want a tariff that gives bumper returns to a lucky few but a tariff that incentivises sensible deployment, in the right place, on the right buildings in the greatest numbers” he later wrote in the Guardian. New Shadow DECC Secretary Caroline Flint, with less than a month in her new role, said the announcement was “yet another example of a Government who are out of touch, are cutting too far and too fast, and have no plan for jobs and growth”.

She said “it is a kick in the teeth for families who want to do the right thing by investing in solar”.

Mr Barker said the coalition's proposals were about “making the FIT scheme more intelligent, more nimble and responsive to market development and, crucially, better value for money”. He also said that the proposals will mean only energy efficient buildings will get the full PV subsidy from April next year. The exponential growth that has seen the industry expand from 3,000 employees last year to 25,000 now has started to impact on the distribution networks. Whether these proposals will change or not is unclear but whatever happens, it is clear that network companies will prepare for a future with a large amount of solar PV generation being imported into the network.

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Brussels update

London Forum

The 4th EU Citizen’s Energy Forum, the London Forum, took place in London last week.

This ‘once-a-year’ gathering of European Regulators, European Commission officials and stakeholder organisations discussed a range of consumer issues including customer empowerment and protection; smart metering and demand response; complaint handling; and retail market design. 

Lord Mogg, as Chairman of Ofgem, President of CEER and Chairman of the ACER Board, suggested that the London Forum itself should be used to drive the process of putting customers at the heart of energy policy development, and he called on Forum participants: - to identify their priorities for the Internal Energy Market (due to be in place by 2014) so it works for consumers; and - to find ways to ensure that consumers can participate in these debates at the right time and right level. Welcoming DG ENER’s newly established Retail Market unit, Lord Mogg suggested that the unit “take a profound look across all energy technical and policy areas of the Commission to make sure that the needs of energy consumers are a critical element of Commission proposals and that they translate into benefits for consumers”.

Lord Mogg said: “We need to inject a customer-focus into the technical work being undertaken on behalf of consumers, be it network codes, energy efficiency, energy infrastructure regulation or wholesale markets, to make sure that customer needs are efficiently balanced against other objectives”.

The conclusions from the Forum highlight the importance of demand response schemes to realise customer benefits inherent in smarter grids. CEER regulators were requested to review the state of play in Member States, with the benchmarking of different solutions regarding meter data management.

The UK networks particularly appreciate the Forum’s recommendation that the national regulators should encourage the deployment of smart grid solutions by DSOs, where they are a cost efficient alternative to existing arrangements. The Forum wants the regulators to find ways to incentivise the networks companies to pursue innovative solutions when beneficial from the viewpoint of society as a whole.

EU 3rd Energy Package – UK implementation

The legal formalities transposing the 3rd energy package into UK law have now almost been completed. Final consideration by the House of Lords was made on 17 October and by the House of Commons on 27 October. The Electricity and Gas (Internal Markets) Regulations are expected to now come into force in early November.

This is a complex set of measures, but probably the two potentially most significant impacts on UK energy networks are the requirements for transmission to be separated from supply and generation interests, “unbundling”, and the changes to Ofgem’s powers.

TSO unbundling

In England and Wales, electricity transmission is owned and operated by National Grid, which is ownership unbundled. In Scotland, the transmission asset owners are Scottish Power and Scottish and Southern Energy, whilst the transmission operator is National Grid. Similarly, in Northern Ireland, the electricity transmission system is owned by NIE but operated by a separate company, SONI.

Gas transmission in England, Wales and Scotland is fully ownership unbundled – owned and operated exclusively by National Grid.

In England and Wales the ownership unbundling model in National Grid will be retained. In Scotland and Northern Ireland no final decision has yet been taken, we believe, but it is likely that use will be made of the Article 9(9) derogation, by which full ownership unbundling of transmission assets by a vertically integrated energy group is not required. To satisfy Article 9(9), it must be established that there are arrangements in place between the system owner and operator that guarantee more effective independence of the TSO than the Independent Transmission Operator model detailed in the Directives.

In terms of 3rd package implementation, the certification process of all the European transmission system operators is likely to take some time, and the Commission will have the final say, effectively a veto over the national regulators.

Regulators’ powers

The 3rd Package brings one major change to the GB regulatory framework: in future Ofgem will be able to modify licences subject to an appeal process. Previously the Regulator could only make changes to licences if a qualified majority of licence holders agreed to the change. If no agreement could be reached, Ofgem would have to refer the matter on to the Competition Commission or else reconsider its proposals.

The UK Government has taken the view that these arrangements were not compatible with the 3rd package requirement that Regulator should be able to take autonomous decisions. Accordingly, the Government has now established a new appeal process, whereby any materially affected party can appeal to the Competition Commission against a licence change. This will be an appeal based on the merits of the case, i.e. the Competition Commission can review the substance of Ofgem’s decision, and, if necessary, substitute its own judgement.

ENA members have worked hard with DECC and Ofgem on the detail of the new licence appeal arrangements to make them workable, but we have yet to see how well this works in practice.

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