UK’s Top Energy Suppliers Warn Bills Will Surge on Grid Upgrades
(Bloomberg) -- The executives of some of Britain’s biggest energy suppliers are warning the government’s push to invest in the power grid could drive up consumer bills in the coming years.
Representatives of Octopus Energy, EDF and E.On gave this assessment on Wednesday in a parliamentary hearing that also featured testimony from Centrica Plc. The energy firms were questioned by lawmakers about the affordability of bills, which include costs to fund new power projects like grid expansion and renewable generation.
The assessment undermines the assertion by the government that the UK’s effort to nearly eliminate emissions from its power grid by 2030 will also lead to lower bills for consumers.
“If we continue on the path that we’re on right now, in all likelihood electricity prices for a typical customer are going to be 20% higher in four or five years’ time than they are now,” said Rachel Fletcher, director for regulation and economics at Octopus Energy. “And that’s even if wholesale prices halve.”
The UK is set to add a significant amount of new costs on consumer bills to support its energy transition. That includes new renewable power generation, grid infrastructure and the cost of back-up supplies from natural gas-fired plants.
“If I look at the non-commodity costs, policy costs, network costs, then certainly some of the modeling that we have suggests that you could get to a position by 2030 where if the wholesale price was zero, bills would still be the same as they are today because of the increase in those non-commodity costs,” Chris Norbury, chief executive of E.ON UK, told parliament on Wednesday.
Simone Rossi, chief executive officer of EDF’s UK unit, said Britain “is building infrastructure as if there was more demand, but in reality there is less and less demand.” According to EDF, UK power demand is now 8% lower than in 2019, despite years of forecasts predicting steady growth.
Energy regulator Ofgem is due later this year to make a price control decision where it will determine how much network companies can spend on expanding Britain’s electricity grid over the next five years. The final determination could see tens of billions of investment.
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