Keeping the Lights On
"Old Sparky"

The dithering, leaks and lobbying on the future of the nation's electricity supplies are now coming to a head as the government prepares to announce its "reform" package - aka a subsidy jamboree for the nuclear and offshore wind industries.

Since the coalition took office, potential developers of soon-to-be-needed new electricity generation plant have scented subsidy in the air on a grand scale.   Egged on by the banks (who are hoping for a lending bonanza to the new generators with the risks being borne by electricity customers), the developers have told the government that not a megawatt of electricity will be developed unless they are featherbedded with a new range of "bungs".

These bungs will effectively penalise conventional producers and drive up the overall price of electricity to the benefit of the "cleaner" nuclear and wind generators.   They include a "floor" on the penalty price of CO2 emissions(to be paid by those who burn coal and gas) at five times its current level;  electricity suppliers being compelled to buy quantities of renewable and nuclear power at inflated prices;  and "capacity payments" for power stations just being there, whether they are generating or not.

The government seems to have swallowed the lobbying whole.   In speeches and interviews, ministers from David Cameron down have been laying the ground for a significant U-turn on the "no public subsidies for nukes" policy, and a package of "reforms" giving developers everything they want.   This, they will argue, is the price of Keeping the Lights On - and a very high price it will be for electricity users who foot the bill.   "Prices are on an upward trajectory because so much of our electricity infrastructure is out of date." Cameron claimed in the Commons.

The normally timid regulator Ofgen, meanwhile, has said it thinks prices are already too high.   Its belated response to Centrica's recently-announced inflation-busting rises has been to launch an inquiry due to report in March.   Stung by the rebuke, Christin McGourty, director of the suppliers' industry body Energy UK immediately blamed the government's numerous "green" impositions on energy companies as the reason consumer prices have risen faster than wholesale prices.

All this is before the planned new subsidies have even been announced, let alone paid out and added to electricity bills.   If the government imagines it can slop these extra charges through without consumers noticing, it should think again:  suppliers won't be slow to let the public know where the increases come from.

Source:  Private Eye 1277, 10 December, 2010.