TIG Post

Tag: energy prices

  • British Gas profit forecasts revised downward due to ‘warm weather’

    Centrica reveals more assistance for vulnerable households as it updates the market on its financial performance, predicting that the group as a whole will outperform many analysts’ expectations.

    The parent company of British Gas has announced additional assistance for struggling customers while lowering profit expectations for its household supply division due to lower demand.

    Centrica said: “Warmer than normal weather in October has contributed towards lower volumes and profits in British Gas Energy”.

    It also pointed to “broader inflationary and economic pressures” hitting the cost base and customer numbers in British Gas Services & Solutions.

    It added: “As a result, we expect adjusted operating profit in our retail division to be lower than current expectations.”

    Centrica made the announcement as consumer groups and surveys report surging numbers of households leaving the heating off as temperatures drop because of record prices for gas and electricity.

    While household energy bills have soared, the wider cost of living crisis is further squeezing spending power.

    Inflation is running at a 40-year high of 10.1% and is tipped by the Bank of England to peak at around 11% – lower than it had initially thought.

    That is largely because the government’s energy price guarantee covering wholesale prices will limit bill increases this winter.

    However, it sees rising interest rates to tackle inflation resulting in the average household facing a £3,000 annual increase in their mortgage costs.

    That more than outweighs any government help with energy bills.

    ‘I hope Sunak brings our energy prices right down’

    Centrica said of British Gas: “With over 10 million customers, we are acutely aware of the difficult environment facing many people and we remain committed to doing what we can to support those who need our help most.

    “Today, Centrica is announcing an additional £25m of help for our customers, taking the amount we have invested in voluntary customer support this year to £50m.

    Its shares soared by up to 9% on its wider trading update, however, as it was intended to set the market straight on the group’s financial performance as a whole.

    It indicated that many of the analysts who watch its performance might be making overly cautious predictions.

    Centrica said group earnings per share were likely to be closer towards the 26p that the most optimistic experts expect than the 15.1p that the most pessimistic have forecast.

    “Centrica has continued to deliver strong operational performance from its balanced portfolio since its interim results in July and now expects full-year adjusted earnings per share to be towards the top end of the range of more recent sell-side analyst expectations,” its statement said.

    The parts of the business that generate electricity and extract gas from under the ground have performed well in recent months.

    The company also announced a share buyback of around £250m.

  • Money-off energy scheme launches to avoid blackouts

    As part of National Grid’s efforts to avoid blackouts, households will be offered discounts on their electricity bills if they reduce peak-time use on a few days during the winter.

    The network operator has released information about the scheme, which it claims could save households up to £100.

    Between November and March, there will be 12 “test” days to see how customers respond.

    However, only homes with smart meters will be able to participate.

    Only 14 million, less than half, of households in England, Scotland and Wales, where the scheme is being tested, have a smart electricity meter installed.

    Customers taking part will be given 24 hours’ notice of a “test” day where they will be asked to reduce their peak-time electricity use if they can during a one-hour period identified by National Grid, likely to be between 16:00 and 19:00.

    That could include delaying use of a tumble-dryer or washing machine, or cooking dinner in the microwave rather than the oven.

    National Grid said it will pay energy suppliers, which will be required to sign up to the scheme to operate it for customers for a smart meter, £3 for every kilowatt-hour during the test periods.

    What is a smart meter?

    Smart meters replace your existing gas and electricity meters and measure the energy you use at home. The big difference is that they send this information directly to your supplier over wireless networks in real-time.

    Suppliers say that this means you pay only for what you use, so bills are more accurate than estimated ones. It also means you can monitor your usage more closely and adjust your habits if you’re looking to save money.

    But if you live in an area with weak signal, your meters might struggle to communicate with your supplier effectively.

    Individual suppliers will decide how much customers will receive and whether the money is taken off bills, credited to accounts, or if there’s an option to withdraw the cash.

    National Grid is testing the idea, which it calls its “Demand Flexibility Service”, at scale for the first time, to establish a system that can serve as an “insurance policy” if it needs to ease demand on the grid this winter.

    Households have been warned of power cuts lasting up to three hours at a time if gas supplies run extremely low, and National Grid is hoping the new scheme can, along with other measures, prevent that happening.

    The electricity network operator said the service had been approved by the UK’s energy regulator Ofgem, which meant electricity suppliers and providers could sign up and then advertise the scheme to customers.

    It is understood many of the UK’s larger energy firms are looking to take part in the trial, after being consulted in recent months on how it would work.

    The scheme is also open to businesses which could, for example, change production schedules or switch to batteries or generators at peak times.

    Jake Rigg, director of corporate affairs at National Grid ESO, said by signing up people could “back Britain” as well as saving money and reducing carbon emissions.

    “It’s not a big thing or a difficult thing to do, just remembering to do it 12 times this winter and get that money back, when we are all really struggling with energy bills and the cost of living generally,” he told the BBC.

    “We can all do our little bit, we can shift demand out of that peak and help maintain security of supply throughout the winter.”

    Smart meter
    IMAGE SOURCE,GETTY IMAGES Image caption, The scheme only applies to homes with smart meters.

    Octopus Energy has already announced it will participate. It operated a trial scheme with 100,000 customers earlier this year, offering a much smaller discount for people who shifted their energy use away from peak times.

    It believes there will be more days on offer – 25 in total compared to 12 planned so far – for households to be given the chance to cut down on energy use as the UK goes through the winter.

    National Grid said Russia’s invasion of Ukraine had created “unprecedented turmoil and volatility” in the energy markets in recent months.

    Gas flows from Russia to Europe have been disrupted since its invasion of Ukraine, leaving countries scrambling for alternative supplies, which could have a knock-on effect on Britain.

    The UK is heavily reliant on gas to produce electricity, with gas-fired power stations generating more than 40% of the country’s electricity.

    The UK also imports electricity from continental Europe.

    National Grid’s central view remains that there will be enough energy to provide Britain with similar levels of electricity to previous winters.

    It said its service is aiming to save two gigawatts of electricity, which is enough to power about one million homes.

    The company has also put coal-fired power stations on standby in case they are required to boost energy generation.

  • A 50% reduction in commercial energy prices is anticipated in the UK

    Under a significant government support programme, energy bills for UK firms will be reduced by around half this winter from their anticipated level.

    In an effort to prevent businesses experiencing skyrocketing costs from going out of business, the programme will stabilize gas and electricity prices for businesses for six months starting on October 1.

    According to the administration, hospitals, schools, and charities would also receive assistance.

    It follows the announcement by ministers of a £150 billion plan to assist homeowners with their skyrocketing costs for two years.

    Industry groups welcomed the package but warned further support may be needed after the winter.

    It is understood the scheme will be reviewed after three months with an option to extend support for “vulnerable businesses” – but it is not known what sectors come under the category.

    Wholesale prices are expected to be fixed for all non-domestic energy customers at £211 per MWh for electricity and £75 per MWh for gas.

    Companies do not need to contact suppliers as the discount will automatically be applied to bills, with savings seen from October but received from November.

    Independent analysts Cornwall Insight said the support was “substantial”, representing a 45% discount on wholesale energy prices at the end of last week.

    “The support effectively reverts the market back to where it was price-wise in the Spring of 2022,” said Robert Buckley, its head of relationship development.

    Prime Minister Liz Truss said the government understood the “huge pressure businesses, charities, and public sector organizations are facing with their energy bills”.

    “As we are doing for consumers, our new scheme will keep their energy bills down from October, providing certainty and peace of mind,” she said.

    “At the same time, we are boosting Britain’s homegrown energy supply so we fix the root cause of the issues we are facing and ensure greater energy security for us all.”

    The support will apply to all non-domestic energy customers in England, Scotland and Wales. A parallel scheme, based on the same criteria and offering comparable support, will be established in Northern Ireland.

    Officials have not said how much the package will cost the taxpayer, as it will depend on what happens to wholesale market prices between October and April when the support expires.

    However, Cornwall Insight estimates the cost at around £25bn.

    Steel manufacturing
    IMAGE SOURCE, MONTY RAKUSEN Image caption, Steel manufacturing requires a lot of energy

    Energy-intensive industries such as steel manufacturers have raised concerns about their energy costs, which have surged following Russia’s invasion of Ukraine.

    Unlike households, businesses are not covered by an energy price cap, which is the maximum amount a supplier can charge per unit of energy. It means non-domestic bills have soared even higher.

    The government announced earlier this month that household bills would be limited to £2,500 annually until 2024 under a separate scheme.

    On Wednesday, it said new laws would be introduced to ensure landlords passed the discount on to tenants who pay all-inclusive bills.

    The government also said it would provide an additional £100 payment to households not able to receive support for their heating costs, such as those not served by the gas grid.

    The big problem with this support for business is its shelf life. Few businesses plan with only a six-month time horizon and there will be some whose plans to cut production, close premises, and let staff go will not change as a result of this intervention.

    But many others – particularly those in retail and hospitality – may see this as giving them a fighting chance over the commercially crucial Christmas trading period.

    The government has thrown an emergency blanket over the economy this winter, but longer-term, more fundamental reform to the energy supply market, its pricing, and mechanics will be needed.

    Developing more cheap renewables, securing foreign supplies of liquid gas, drilling for more domestic fossil fuels, breaking the link between gas prices and electricity, and pushing ahead with hydrogen, carbon capture and storage, and small and large-scale nuclear have been part of the government’s plan for nearly two years.

    What’s new is the pressure applied by Vladimir Putin to do it as fast as possible.

    ‘Welcome but more to be done’

    Stephen Phipson of Make UK, which represents UK manufacturers, said businesses would “warmly welcome” the government support.

    “Government has delivered a scheme which is simple to understand, giving reassurance to the business sector and making immediately available the much-needed help companies have been calling for across the board at a time energy costs were spiraling out of control.”

    However, Mr Phipson warned that energy prices were likely to remain high for more than the six-month duration of the scheme and firms may need “support for a longer period if we are to protect jobs and remain competitive”.

    Director General of UK Steel, Gareth Stace, said the price cap would give steel makers “the chance to get through the winter”. But he called on the government to “rapidly reform the energy market to ensure longer-term competitive prices beyond the current price”.

    Smaller businesses have also been struggling with rising bills, with brewery bosses warning pubs and restaurants across the UK will be forced to close due to energy costs soaring by as much as 300%.

    A landlord of one pub in Essex told the BBC his energy bill had risen from about £13,000 a year to £35,000.

    Kate Nicholls, chief executive of UKHospitality, said the industry was “relieved” by the support ahead of the busy Christmas trading period.

    “The inclusiveness of the support announced today – covering businesses small and large – will be extremely beneficial to the sector… A sector that provides a huge number of jobs, many of which are now more secure.”