The Informer

The owner of the UK’s largest distribution network operator is putting the business up for sale; Ofgem sets out proposals for networks to recover Covid-19 bad debts; and electric vehicle sales soar as dealerships reopened after lockdown.

  • Distribution network operator to go up for sale

    The US owner of Western Power Distribution (WPD), which delivers electricity to over 7.9 million customers in the Midlands, South West and Wales, is looking to sell the business.

    Utility group PPL Corporation said it was initiating a formal process to dispose of the operation in order to focus on its core US market.

    PPL said WPD - which is the largest Distribution Network Operator (DNO) by geography in the UK - is a “very strong business that continues to perform exceptionally well” but it believes it is undervalued by the market as part of PPL.

    WPD consists of four distribution network operators in the UK which PPL said have “outstanding track records of performance, earning more performance incentive revenues under UK regulation than every other DNO group.”

    “We believe that greater value can be achieved for PPL shareowners through a sale of the UK business and use of proceeds that would be focused on strengthening PPL's balance sheet and enhancing the company's long-term earnings growth,” said the company.

    PPL has engaged JP Morgan Securities to act as its financial advisor to assist with the sale process, with the intention to announce a transaction in the first half of 2021.

    Read more

  • Ofgem sets out Covid-19 bad debt proposals

    The regulator has set out options to enable networks to recover potential bad debts due to the impact of Covid-19 on the energy sector.

    Earlier this year the regulator asked energy network companies to develop schemes to provide relief to cash flow-constrained suppliers and shippers who were struggling to pay electricity distribution and transmission network charges and gas transmission charges.

    Under the Network Charge Deferral (NCD) scheme, run by the Energy Networks Association, firms are able to defer network charges as a last resort option once all other lines of credit have been exhausted.

    Ofgem has now come up with proposals to enable the effective recovery of bad debts arising under the scheme in 2021-22 and which would also allow for the recovery of other bad debts incurred due to non-payment of network charges.

    The options include the introduce a new NCD specific bad debt pass-through term similar to existing ones in the RIIO-1 price control licence. This would involve setting a provisional allowance, based on estimated values provided by the licensee, which would be ‘trued-up’ in the following period.

    Ofgem also said it was proposing an “all-purpose bad debt term” in the RIIO-ED2 licence, to make it consistent with the other sectors.

    The deadline for responses is 4 September.

    Read more

  • Electric vehicles post bumper sales growth

    Sales of pure electric vehicles in the UK jumped by more than 250% last month compared to the same period last year.

    Figures published by the Society of Motor Manufacturers and Traders (SMMT) revealed there were 8,162 battery electric vehicles registered during July, taking a 4.7 per cent overall share of the market. The increase in sales so far this year is 174.6%. Registrations of plug-in vehicles rose by more than 320% year-on-year.

    Overall UK new car registrations rallied in July with 11.3% increase to 174,887 vehicles, as dealerships across the nation fully re-opened.

    A recent report from Deloitte said that the end of the decade, a third of all new car sales worldwide will be electric. This would bring the total number of electric vehicles (EVs) sold in a single year to 31.1 million globally, 10 million more than previously forecast.

    Meanwhile Gridserve, which is looking to open more than 100 "electric forecourts" for charging EVs, has purchased the UK's first subsidy-free solar farm at Clayhill in Bedfordshire from developer Anesco as part of the plans.

    Read more

  • National Grid unveils £10m project to test hydrogen heating

    National Grid has announced plans for a project to explore how hydrogen gas could be used to heat homes and deliver green energy to industry.

    It is partnering with Northern Gas Networks (NGN) and Fluxys Belgium to build a first of its kind offline hydrogen test facility in the UK.

    The £10m facility at Spadeadam, Cumbria, will be built from a range of decommissioned assets, to create a network which will be used to trial hydrogen and will allow for accurate results to be analysed. Blends of hydrogen up to 100% will then be tested at transmission pressures, to assess how the assets perform.

    The plans have been submitted to Ofgem and if funding is awarded, the aim is to start construction in 2021 with testing beginning in 2022.

    Currently 85% of homes and 40% of the UK’s power needs are supplied by gas. But as the UK works towards becoming one of the world’s first net zero economies by 2050, the gas sector needs to demonstrate a viable pathway for decarbonisation.

    Antony Green, Project Director for Hydrogen at National Grid, says: “If we truly want to reach a net zero decarbonised future, we need to replace methane with green alternatives like hydrogen. Sectors such as heat are difficult to decarbonise, and the importance of the gas networks to the UK’s current energy supply means trial projects like this are crucial if we are to deliver low carbon energy, reliably and safely to all consumers.”

    Read more

  • Lower wholesale gas costs see energy price cap fall

    A sharp decrease in wholesale gas prices due to the impact of Covid-19 has seen the price cap for domestic consumers falling by £84 to £1,042 a year for this winter.

    The 7% drop takes the level to the lowest since the cap was introduced on January 1 2019.

    The changes mean that around 11 million households on default tariffs and 4 million on prepayment meters - around half the population in total - will see significant savings on their energy bills this winter.

    Ofgem said the Covid-19 crisis has depressed energy demand and led to wholesale gas prices falling, although they have started to recover since hitting 20 year lows in the spring.

    If wholesale energy prices continue to rise over the coming months, the cap is likely to rise in April to reflect these higher costs. Ofgem adjusts the level of the cap twice a year to reflect the estimated costs of supplying electricity and gas to homes for the next six-month period.

    Suppliers cannot charge customers who do not switch and are on default deals more than the level of the cap, although they can charge less.

    Read more