It was not a bluff. When Centrica warned a month ago that it might choose to leave one of Britain’s biggest gas fields off-line because of the higher taxes levied on UK energy companies, some thought this was an empty threat.
However, South Morecambe gas field has become available after a period of routine maintenance – and Centrica chose to leave it dormant on Wednesday morning.
This morning’s clampdown by the UK regulator on the country’s big six utilities was unexpectedly hard-hitting.
Apart from the news that the companies may be forced to auction up to 20 per cent of their electricity generation output, there was the harsh tone struck by the regulator’s chief executive, Alistair Buchanan. He said:
Energy companies have failed to play it straight with consumers and so Ofgem is proposing to break the stranglehold the Big Six have over the electricity market.
There have already been some noises off between the UK government and the green energy industry over the green investment bank, the government’s proposed investment vehicle for funding clean energy projects. Apart from anything, many in the sector simply don’t think the £1bn promised by Chris Huhne, the energy secretary, is enough.
But another faultline opened up today at a briefing attended by both Sam Laidlaw, the chief executive of Centrica (pictured), and Huhne himself. Specifically, the pair seemed to be at odds over whether the green investment bank could be used to fund energy efficiency initiatives.
British Gas customers brace yourselves. From December 10 you will have to pay an average of £53 extra a year for gas and £29 extra for electricity.
But given this global gas glut that we keep hearing about, the question is why are prices about to rise?
The answer BG gives is that whatever is happening on the global scale, they are paying more now than they were last year for wholesale gas – 25 per cent more in fact. They are also paying more for extra costs like transportation and other overheads.
Last week I wrote that one of the areas of complete agreement at a debate during the European Future Energy Forum had been the need for a high and stable carbon price to incentivise low carbon energy production. But I added that nobody knew how to bring it about.
During that debate, the foreign office minister Lord Howell said:
The government has got to keep its nerve and do some brave things which are highly unpopular and likely to lose nice votes. This is getting if anything more difficult, as gas gets very cheap, and the gap with renewables widens. We need to get costs down and carbon price up.
This resolution to make a potentially unpopular move will be tested on Wednesday evening. That is when the big six British energy companies, including Centrica, EDF and Scottish Power, will warn Chris Huhne over dinner that the government’s proposed carbon floor price is not going to achieve much.
I wrote below about whether the industry would get what it wanted from Chris Huhne, the energy secretary, in his speech to the Liberal Democrats today. Now his brief but initiative-packed speech is over, did they get what they wanted?
Roger Salomone, energy adviser at EEF, wanted to see reassurances over nuclear power. This is what Huhne said:
I’m fed up with the stand-off between renewable and nuclear which means we have neither – we will have both. We will have low-carbon energy, and security of supply.
And EEF’s reaction:
Given the audience that was a reassuring message on nuclear power from our perspective. He linked nuclear power to some positive things, like energy security and tackling climate change.