Oct 22, 2019 in Business

Energy Bills in UK

The current energy regulation policies on the United Kingdom are set out in the Low Carbon Transition Plan of 2009 and the Energy White paper of 2007. They are built on the previous work including 2003 Energy White Paper and led by the Department of Energy and Climate Change. The present amendment focuses on reforming the Electricity market and rolling out smart metre to improve efficient energy production, distribution and consumption in the country.  The scope of UK Energy Bills, Acts and Laws include production, distribution of electricity, usage of transport fuel and means of heating which is more significant for natural gases. However, the principles of these acts have changed to focus on carbon dioxide emission, reliable supply of energy, promoting competitive market and increasing the access to domestic energy affordably. 

Previous Energy Bills in UK

The United Kingdom has had a series of amendments in energy bills over time. There has been historical increase in energy bills due to increase in international price of oil and gas and available investment in in gas and electricity network. The UK also project an increase and changes due to constant changes in global energy regulations and technological advancements. These bills include the residential energy bills, commercial energy bills and industrial energy bills and have changed over time since 1980s. 

 
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The first phase of major historical changes in energy sector in UK can be traced in 1979 during the reign of Margret Thatcher. This was during the wake of widespread strikes in oil producing countries which led to increased price of crude oil in the world. The first oil shock raised the status of energy policies in UK and other parts of the world. The Department of Energy was introduced while the OECD states set up an International Oil Agency. The secretary of state for energy announced to the parliament the intention to set up nuclear power stations in order to have a long term energy supply under the industrial uncertainties presented by the oil crisis. This decision was reached after a consultation with electricity sector. In 1981 the government ordered the construction of 15,000 MW nuclear power station as an opportunity to resolve the long running debate on UK reactor designs

In 1982, the Energy Select committee announced a change in energy policies that was followed by a Monopolies and Merger Commission. Due to the arising confusion, it was clear that the government was not fully committed to the 15,000 MW ten years program and in 1983, the commission chairperson claimed there were never such a program in existence. The nuclear program was not the only challenge for the government but there were also a widespread worry about high electricity and gas prices. 

In 1983, the Energy Act was passed to put into practice the Lawson’s rhetoric’s and received a royal assent the same year. The Act was meant to liberalise the vertically integrated electricity sector by allowing the producers to sell to the Area Boards. The boards were responsible for serving customers of electricity by permitting the producers an access to the transmission and distribution system. Whilst the Energy Act had a little effect, it never led to significance increase in private generation of power but set the scene for radical reforms in the later years. 

 The Gas Act of 1986 allowed competitors to supply more gas to large industrial consumers using the British Gas Pipelines and allowed the power regulators to set the terms of use in the British Gas pipeline networks. Equal access to the British Gas pipeline network had previously not been established and the competing suppliers never had access to wholesale gas which was only contracted to British Gas.

 From 1990 to 1996, the energy Bills presented in parliament and the government proposals focused on searching for a full discipline in the market. The privatisation of electricity industry began in 1990 with the sale of Regional Electricity Companies which coincided with Margret Thatcher’s resignation and replacement by Chancellor John Major.  As the initial structure and regulation regime in electricity became conducive in developing competition than in the case of gas, the process of implementation was similarly lengthy and complex. 

Meanwhile, from 1995 to 2000, there was an on-going government effort to improve competition for both gas and electricity by enacting laws that would remove monopolistic market structure. In 1995, the government published the review on prospectus of Nuclear power after it failed earlier during the energy crisis of 1980s. 

Criticism on Previous Energy Bills

The energy bills that had previously been enacted were criticised for having no clear objective in enhancing efficiency in the production, supply and consumption of energy. For example, the energy Act of 1981 that was intended to create a nuclear power plant producing 15,000 Mw was criticised for not having an elaborate plan for its implementation. In fact, the secretary in charge of energy department denied any possibilities of its existence after it failed to materialise. The other challenges that the energy policies the UK faced were lack of proper consideration of changes in technology and environmental concerns. These changes failed to be put in place on nuclear energy plans. In addition, the government did not effectively evade the energy crisis in future by allowing monopolistic competition in the energy sector. 

EU and International Legislation on Energy

The European Union has enacted various legislations in areas of energy policy for many years. The idea of introducing compulsory and comprehensive European Energy Policy was agreed during the European Council meeting at Hampton Court in 2005.  Europe Union’s key proposals include the targets to reduce carbon emission by 40% by the year 2030. Before the Lisbon Treaty, the EU’s energy policies were based on its authority in the control of common market and environmental concerns. In order to achieve this, the union has set the following plans to research programs in steering strategic energy technologies. 

According to In Coyle, In Simmons and Global Policy Research Institute the set initiatives are;

  • European wind initiatives - focuses on implementation and validation of turbines systems
  • Solar Europe initiative – focuses on large scale research and demonstration of photovoltaic power generation.
  • Bio energy Europe initiative – focusing on the next generation bio-fuels

New Technologies to Solve Previous Environmental and Energy Problems

There are various technologies that have been discovered with the aim of solving energy problems in future. For example, the European Union has established various research centres with the aim of developing alternative sources of energy and reduce consumption of bio fuels. For instance, the research on large scale production of power through photovoltaic principles is underway and the technology will make use of the increasing solar energy to produce electricity. More effective hydro- power generation processes are being studied. Geo-thermal, wind, nuclear sources and tidal waves are also being utilised in various regions and would become the next big thing in the energy sector. Thus, with such developments in production of energy will help reduce the rate of carbon emission in the atmosphere and this would help control global warming problems. 

The Energy Act 2013

In 2012, the Secretary of State for Energy management confirmed the reception of the energy bill in the House in addition to the annual statement of energy. The act later received the Royal Assent in December 2013.  The committee for climate change and energy conducted a pre-legislative inspection on the Electricity Market Reforms on the draft which was meant to respond to the comments of the House of Lords on the issues relating to energy problems.  The act was meant to establish a regulative framework for distributing affordable, secure and low carbon energy that includes provision on the issues of decarbonisation, electric market reforms (ERM), nuclear regulations, and government pipeline and storage system as well as consumer protection.

Key Priorities that Shall be Addressed by the New Energy Bill

In decarbonisation, the provisions on the energy act would empower the state to set a vision 2030 decarbonisation objective for electricity power in secondary legislation. Such a decision of exercising the power as a secretary of state shall be considered upon the advice of the Committee of Climate Change on the level of 5th Carbon Financial plan.  The Carbon Budget is intended to cover the corresponding periods between 2028 and 2032 and after the government has set the budget, it would be required to take effect in the year 2016. 

 These measures are also required to cope with the increasing demand for electrical energy by adjusting the following requirements. There shall be long term contracts that will provide long term engagements for a stable and predictable incentive for willing companies to invest in low carbon power generation. The government will create capacity market to ensure the security of electricity supply which includes the provisions to allow reduction of electricity demand. The committee on energy shall be responsible for solving conflicts of interests and contingency arrangements to ensure that institutions deliver only those schemes fit for purpose. Better measures to address access to markets including Power Purchase Agreements will help in ensuring the presence of long term contracts for independent and renewable generators and liquidity improvements to allow the government to take actions in improving electricity market.

The aim of this act is to reduce the household power consumption rates to achievable levels and increase accessibility to more consumers. 

The Act will also introduce an interim office for Nuclear Regulation based on statutory footing as a way of regulating the safety and security of the future generation nuclear plants. In addition, the Act intends to introduce a system that will enable the sale of the government owned pipeline and storage system which include providing the rights and compensation in respect for creation of new rights for transfer of ownership and power to dissolve the oil and pipeline agencies by order. 

Lastly, the act shall ensure effective consumer protection in various sectors relating to distribution of energy by establishing and setting the following measures in place. The acts shall set the limit on the value or number of tariffs needed to be offered to the domestic consumers in order to have an automated move of consumers from allow value closed tariffs to cheaper deals. Ofgem shall also be allowed to extend its license regime to third party intermediaries like the switching websites in order to have a new enforcement power over the company.

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