Cheap-energy drive seen risking UK climate goals

Bloomberg

Britain’s zeal to protect consumers from higher energy prices may be about to upend measures to rein in fossil-fuel pollution.
Power grid operators warned they won’t be able to break even on future investments to upgrade the electricity system if a proposal to slash authorized profit margins takes effect. Backing that view is Moody’s Investors Service, which said tighter limits from the regulator Ofgem would have a knock-on effect of reducing the credit quality of network companies.
“Ofgem has gone too far,” Paul Bircham, the chairman of Electricity Networks Association’s public affairs committee, said in an interview. “Investors are seriously concerned about this. “They want to know if it’s a short-term blip or is it an indicator of a much more hostile environment.” The remarks underscore the headwinds Prime Minister Theresa May’s government is facing in balancing a desire for building greener industry against efforts to lower household energy bills. The government wants utilities to help build a more flexible power grid that can absorb flows from intermittent wind and solar farms — and help spur the spread of electric vehicles.
The government’s pledge to cut energy costs is shared by the opposition Labour Party. Its leader Jeremy Corbyn has said he wants to go even further and bring grid companies under state ownership. Last month, responding to concerns that utilities are overcharging, Ofgem proposed a cut to authorized returns that network operators can make. It suggested lowering the cost of equity earned by the companies to 3 percent to 5 percent from the current range of 6 percent to 7 percent.