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UK Energy Companies Threaten To Divest Over Theresa May’s Energy Price Cap

The Sunday Telegraph

The Government’s planned roll-outs of “smart” energy meters and electric vehicles are under threat as a result of Theresa May’s flagship conference pledge for a cap on electricity and gas bills, industry figures have warned.

Senior sources said the Prime Minister’s plans to set limits on energy prices paid by consumers cast into doubt ministers’ plans for all homes to be offered smart meters by 2020.

They also disclosed that Big Six firms are gearing up for a “significant” legal challenge if the cap was proposed at levels previously indicated by Mrs May and the Competition and Markets Authority (CMA), which would “wipe out all the profitability for the whole industry”.

The warnings came after an analysis seen by The Telegraph concluded that the introduction of new meters is expected to cost the industry £6 billion between now and 2020 and that a cap that “pushes the industry as a whole to break-even or losses has significant implications on the smart meter roll-out programme.”

The Government wants to promote smart meters and electric vehicles but… they are doing something to the companies who are meant to deliver thisSenior energy industry source

The analysis, produced by Alliance Bernstein, an investment firm, adds that “smart metering and smart charging is absolutely essential to secure the cost-effective deployment of electric vehicles.”

A senior energy industry source said:  “On the one hand the Government wants to promote smart meters and electric vehicles but on the other hand they are doing something to the companies who are meant to deliver this that means that they might not be able to do so.”

Another executive said that they were also preparing for the possibility of reneging on the smart-meter roll-out. “If you are losing money you cut investment,” the source said.

Energy firms have been obliged by Ofgem, the regulator, to offer smart meters to all customers by 2020, with fines liable to be imposed on those that fail to comply.

But the executives believe either that a mandatory cap that wiped out their profits could relieve them of that obligation, or that the fines could be worth paying in the absence of adequate funds to pay for the meters. […]

Last week British Gas refused to rule out a legal challenge to the proposed cap in the face of repeated questions by MPs on the Business, Energy and Industrial Strategy committee.

But a senior industry source told this newspaper: “If the £1.4billion is removed through a reduction in profits across the board then the whole industry will go into loss.

“We would judicially review it, as would all the companies. We would have a fiduciary duty to do that in order to protect our shareholders.”

John Penrose, a Conservative MP who campaigned for a cap, said: “The British energy consumer has the Big 6 on the run and they are using every tool at their disposal to try to wriggle out of the energy price cap legislation.

“The Big 6 still don’t get it – they don’t deserve some sort of prize or concession for ending the scourge of rip-off tariffs.”

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