Politics

UK Regulator Accused Of Playing Politics Over ‘Perverse’ Price Controls – Greentech Media News

Published

4 years ago

September 14, 2020

The debate over the next round of price controls for U.K. transmission companies was always going to be a heated one.

In July Ofgem, the U.K’s electricity and gas regulator, published its draft proposals for RIIO-2 — the price control framework for transmission networks during 2021-2026 — after lengthy consultations with the industry. The headline figure is a cap on equity returns of 3.95 percent. A separate framework for distribution networks is still in development.

That 3.95 percent figure is down from the real-world returns on equity across the three operators — National Grid, SSE and SP Energy Networks — of between 8-10 percent, according to data from Ofgem.

Ofgem insists the 3.95 percent cap is enough to attract investment to modernize the country’s grid while also protecting consumers. But the proposals have been met with fierce opposition from the grid and gas network operators themselves. They claim such a low cap on equity returns will stall investment, put the country’s electrification agenda at risk, and even reduce reliability across the network.

Ofgem’s price control framework, known as RIIO (that’s Revenue=Incentives+Innovation+Outputs), will enter its second five-year period (RIIO-2) next year, covering both gas and electricity transmission.

The influential consumer rights group, Citizens Advice, publicly called out the operators for “raking in £7.5B in unjustified profits” during the first RIIO period.

Ofgem denies that politics is at play in the debate. But whatever its motivation for proposing the lower cap, there is a gulf between the draft plan and the companies charged with building much of the infrastructure required to transform the country’s energy landscape.

“Unfinanceable”

Ofgem insists that grid investments can continue under the conditions set out.

“The evidence makes clear that networks can attract investment at much lower rates of return,” an Ofgem spokesperson told GTM by email. “Given the uncertainties of the current economic climate and beyond, our stable, predictable and transparent regulatory regime makes British network companies an extremely attractive proposition for investors around the world.”

“There is strong evidence that investment continues without difficulty for similar returns to our proposals in the regulated U.K. water sector,” the spokesperson added.

But the grid operators disagree. Nicola Shaw, chair of National Grid’s electricity transmission business, signed a letter saying: “The impacts of these proposals are to create unnecessary delay and uncertainty to the delivery of projects supporting net-zero, perverse incentives to delay low carbon connections and avoidable regulatory burden and transaction costs.”

“These consequences manifest as a material depletion in the ability to avoid power cuts in serious weather events, regional impacts associated with specific rejected investments, and higher costs in the future,” Shaw added in the letter to Ofgem, stating the company’s position.

National Grid serves as the system operator in the U.K., while its transmission business holds the monopoly in England and Wales for transmission infrastructure and interconnectors to other countries.

Alistair Phillips-Davies, CEO of SSE, which runs the transmission network in northern Scotland, wrote in blog post that a financial analyst had called the proposals “unfinanceable.”

“It’s absolutely right that Ofgem protects billpayers, but the cost of delaying critical investments will cause us to pay a much heavier price in years to come,” Phillips-Davies wrote.

Ofgem’s proposal leaves the door open to reassessing the price control if extra net-zero investment is needed, for example in areas like EV chargers. However, some in the industry fear this model could slow down progress and add extra bureaucracy, compared to giving the grid operators access to greater revenue for reinvestment from the outset.

Two types of politics at work

RIIO-2 is not happening in a political vacuum. Ofgem has been criticized in the past for rising energy bills and the (very) delayed smart meter rollout. An annual industry poll of utility CEOs has routinely seen more than half claim that Ofgem is “not fit for purpose.”

The U.K.’s National Audit Office, a spending watchdog, said in January that Ofgem errors had seen billpayers overcharged during RIIO’s first period.

At the same time, successive governments in the U.K. have targeted tough measures against the electricity sector as vote winners, be they suppliers or network firms. First, competition was opened up and the so-called Big 6 retail suppliers were cast as the villain. A price-cap was introduced and recently lowered again. The price cap on consumer bills has been blamed, in part, for pushing new suppliers out of the market by limiting their returns.

One industry insider said the politics around Ofgem’s price controls are less about party politics and voter-friendly attempts to cut bills and more about “Whitehall Politics.” Boris Johnson’s government is looking to scale back the public sector. Those considered to be underperforming, or over-funded, will be looking over their shoulder and keen to prove their relevance.

“[Ofgem] hasn’t listened to the customers,” the insider said, adding that the billpayers have demonstrated an interest in safety, reliability and net-zero. “They’ve listened to a view that the network returns were too high in RIIO-1 and just decided to flex their muscles, and show that they are a ‘tough regulator’ by bringing in what many in the industry believe is a draconian level of return.”

Net-zero carbon not an Ofgem objective

Other major infrastructure proposals, including road building and the expansion of Heathrow Airport, have seen the U.K.’s net-zero legislation used against them. After a long-running battle, Heathrow’s third runway was blocked by the courts after environmental groups said the climate impact had not been considered. Such an objection, on climate grounds, to RIIO-2 would be considered a desperate, last-ditch move. All parties would rather find an amicable resolution.

Until then, the network companies have threatened to refer the issue to the Competition and Markets Authority. The CMA would hear any formal appeal against the framework and can adjudicate over alleged errors in Ofgem’s methodology.

One potential root cause of stand-off lies in Ofgem’s remit, which does not explicitly include helping the government reach its target of net-zero emissions by 2050, said Charlotte Hanson, an energy lawyer with ClientEarth.

“Given that Ofgem regulates the second-highest emitting sector of the U.K. economy, this massively impedes the country’s prospects for meeting its targets,” Hanson wrote in an email.

“Through its recent decisions, we’re seeing that Ofgem is failing to build the framework for a decarbonized energy system. This is exactly why we need reform of the objectives that govern the regulator. Without that, how can this country credibly be fighting to meet its climate targets?”

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Politics

‘Disgraceful:’ N.S. Tory leader slams school’s request that military remove uniform

Published

1 day ago

November 8, 2024

Anne Joseph

HALIFAX – Nova Scotia Premier Tim Houston says it’s “disgraceful and demeaning” that a Halifax-area school would request that service members not wear military uniforms to its Remembrance Day ceremony.

Houston’s comments were part of a chorus of criticism levelled at the school — Sackville Heights Elementary — whose administration decided to back away from the plan after the outcry.

A November newsletter from the school in Middle Sackville, N.S., invited Armed Forces members to attend its ceremony but asked that all attendees arrive in civilian attire to “maintain a welcoming environment for all.”

Houston, who is currently running for re-election, accused the school’s leaders of “disgracing themselves while demeaning the people who protect our country” in a post on the social media platform X Thursday night.

“If the people behind this decision had a shred of the courage that our veterans have, this cowardly and insulting idea would have been rejected immediately,” Houston’s post read. There were also several calls for resignations within the school’s administration attached to Houston’s post.

In an email to families Thursday night, the school’s principal, Rachael Webster, apologized and welcomed military family members to attend “in the attire that makes them most comfortable.”

“I recognize this request has caused harm and I am deeply sorry,” Webster’s email read, adding later that the school has the “utmost respect for what the uniform represents.”

Webster said the initial request was out of concern for some students who come from countries experiencing conflict and who she said expressed discomfort with images of war, including military uniforms.

Her email said any students who have concerns about seeing Armed Forces members in uniform can be accommodated in a way that makes them feel safe, but she provided no further details in the message.

Webster did not immediately respond to a request for comment.

At a news conference Friday, Houston said he’s glad the initial request was reversed but said he is still concerned.

“I can’t actually fathom how a decision like that was made,” Houston told reporters Friday, adding that he grew up moving between military bases around the country while his father was in the Armed Forces.

“My story of growing up in a military family is not unique in our province. The tradition of service is something so many of us share,” he said.

“Saying ‘lest we forget’ is a solemn promise to the fallen. It’s our commitment to those that continue to serve and our commitment that we will pass on our respects to the next generation.”

Liberal Leader Zach Churchill also said he’s happy with the school’s decision to allow uniformed Armed Forces members to attend the ceremony, but he said he didn’t think it was fair to question the intentions of those behind the original decision.

“We need to have them (uniforms) on display at Remembrance Day,” he said. “Not only are we celebrating (veterans) … we’re also commemorating our dead who gave the greatest sacrifice for our country and for the freedoms we have.”

NDP Leader Claudia Chender said that while Remembrance Day is an important occasion to honour veterans and current service members’ sacrifices, she said she hopes Houston wasn’t taking advantage of the decision to “play politics with this solemn occasion for his own political gain.”

“I hope Tim Houston reached out to the principal of the school before making a public statement,” she said in a statement.

This report by The Canadian Press was first published Nov. 8, 2024.

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Politics

Saskatchewan NDP’s Beck holds first caucus meeting after election, outlines plans

Published

1 day ago

November 8, 2024

Anne Joseph

REGINA – Saskatchewan Opposition NDP Leader Carla Beck says she wants to prove to residents her party is the government in waiting as she heads into the incoming legislative session.

Beck held her first caucus meeting with 27 members, nearly double than what she had before the Oct. 28 election but short of the 31 required to form a majority in the 61-seat legislature.

She says her priorities will be health care and cost-of-living issues.

Beck says people need affordability help right now and will press Premier Scott Moe’s Saskatchewan Party government to cut the gas tax and the provincial sales tax on children’s clothing and some grocery items.

Beck’s NDP is Saskatchewan’s largest Opposition in nearly two decades after sweeping Regina and winning all but one seat in Saskatoon.

The Saskatchewan Party won 34 seats, retaining its hold on all of the rural ridings and smaller cities.

This report by The Canadian Press was first published Nov. 8, 2024.

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Politics

Nova Scotia election: Liberals say province’s immigration levels are too high

Published

2 days ago

November 7, 2024

Anne Joseph

HALIFAX – Nova Scotia‘s growing population was the subject of debate on Day 12 of the provincial election campaign, with Liberal Leader Zach Churchill arguing immigration levels must be reduced until the province can provide enough housing and health-care services.

Churchill said Thursday a plan by the incumbent Progressive Conservatives to double the province’s population to two million people by the year 2060 is unrealistic and unsustainable.

“That’s a big leap and it’s making life harder for people who live here, (including ) young people looking for a place to live and seniors looking to downsize,” he told a news conference at his campaign headquarters in Halifax.

Anticipating that his call for less immigration might provoke protests from the immigrant community, Churchill was careful to note that he is among the third generation of a family that moved to Nova Scotia from Lebanon.

“I know the value of immigration, the importance of it to our province. We have been built on the backs of an immigrant population. But we just need to do it in a responsible way.”

The Liberal leader said Tim Houston’s Tories, who are seeking a second term in office, have made a mistake by exceeding immigration targets set by the province’s Department of Labour and Immigration. Churchill said a Liberal government would abide by the department’s targets.

In the most recent fiscal year, the government welcomed almost 12,000 immigrants through its nominee program, exceeding the department’s limit by more than 4,000, he said. The numbers aren’t huge, but the increase won’t help ease the province’s shortages in housing and doctors, and the increased strain on its infrastructure, including roads, schools and cellphone networks, Churchill said.

“(The Immigration Department) has done the hard work on this,” he said. “They know where the labour gaps are, and they know what growth is sustainable.”

In response, Houston said his commitment to double the population was a “stretch goal.” And he said the province had long struggled with a declining population before that trend was recently reversed.

“The only immigration that can come into this province at this time is if they are a skilled trade worker or a health-care worker,” Houston said. “The population has grown by two per cent a year, actually quite similar growth to what we experienced under the Liberal government before us.”

Still, Houston said he’s heard Nova Scotians’ concerns about population growth, and he then pivoted to criticize Prime Minister Justin Trudeau for trying to send 6,000 asylum seekers to Nova Scotia, an assertion the federal government has denied.

Churchill said Houston’s claim about asylum seekers was shameful.

“It’s smoke and mirrors,” the Liberal leader said. “He is overshooting his own department’s numbers for sustainable population growth and yet he is trying to blame this on asylum seekers … who aren’t even here.”

In September, federal Immigration Minister Marc Miller said there is no plan to send any asylum seekers to the province without compensation or the consent of the premier. He said the 6,000 number was an “aspirational” figure based on models that reflect each province’s population.

In Halifax, NDP Leader Claudia Chender said it’s clear Nova Scotia needs more doctors, nurses and skilled trades people.

“Immigration has been and always will be a part of the Nova Scotia story, but we need to build as we grow,” Chender said. “This is why we have been pushing the Houston government to build more affordable housing.”

Chender was in a Halifax cafe on Thursday when she promised her party would remove the province’s portion of the harmonized sales tax from all grocery, cellphone and internet bills if elected to govern on Nov. 26. The tax would also be removed from the sale and installation of heat pumps.

“Our focus is on helping people to afford their lives,” Chender told reporters. “We know there are certain things that you can’t live without: food, internet and a phone …. So we know this will have the single biggest impact.”

The party estimates the measure would save the average Nova Scotia family about $1,300 a year.

“That’s a lot more than a one or two per cent HST cut,” Chender said, referring to the Progressive Conservative pledge to reduce the tax by one percentage point and the Liberal promise to trim it by two percentage points.

Elsewhere on the campaign trail, Houston announced that a Progressive Conservative government would make parking free at all Nova Scotia hospitals and health-care centres. The promise was also made by the Liberals in their election platform released Monday.

“Free parking may not seem like a big deal to some, but … the parking, especially for people working at the facilities, can add up to hundreds of dollars,” the premier told a news conference at his campaign headquarters in Halifax.

This report by The Canadian Press was first published Nov. 7, 2024.

— With files from Keith Doucette in Halifax

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