Letter by EDF Energy
Thank you for you letter of 11 January and your
invitation to submit evidence ahead of the Business, Enterprise
and Regulatory Reform Committee session on January 31 with the
Minister for Energy, Malcolm Wicks MP.
As one of the UK's largest energy companies,
EDF Energy is keen to engage in this process. In response to your
specific questions, I am pleased to provide the following evidence.
1. If you have increased prices what steps
you have taken to mitigate the impact on vulnerable groups and
if you have not raised prices, whether you expect to raise prices
for your retail customers in 2008?
EDF Energy has worked hard to mitigate the effect
of rising costs for our most vulnerable customers. We were the
first energy supplier in 2006 to introduce a social tariff, Energy
Assist, which currently offers our fuel poor customers a 15% discount
on their bill. 50,000 customers in receipt of that tariff will
therefore continue to pay us discounted prices. We also offer
those customers free benefit entitlement checks to ensure that
they wre receiving all the income assistance for which they are
eligible, in order to help them meet their energy bills.
We were also the first energy supplier to set
up an independent trust fund, the EDF Energy Trust, to which we
have already donated nearly £7 million and which has made
awards to around 8,000 households experiencing problems with energy
and other household debt. This has been very effective and we
have found that 12 months or more after receiving a grant, over
70% of households have remained free of debt.
Although only a small proportion of our customers
using prepayment meters are fuel poor, they do tend to be lower
income households. We have developed a responsible approach to
these customers and we were the first energy supplier to align
our electricity prepayment prices to those of our standard tariff
and were also the first to offer those prepayment customers the
peace of mind of a fixed price tariff.
EDF Energy's Fixed Price 2010 tariff will enable
customers to fix their prices until 31 July 2010. This offers
protection and security in a volatile market. EDF Energy is alone
in the industry in making this available to prepayment customers.
There is no cancellation fee or penalty should the customer want
to come off this product at a later date.
EDF Energy has also helped to establish a London
Warm Zone with Newham Borough Council in 2001. This delivers intensive
door-to-door assessments of households to identify vulnerable
households where energy efficiency can be improved and provides
support for customers to claim benefits for which they are eligible.
The success of this scheme has seen it extended across East and
West London so that more than 40% of London Boroughs are now covered.
In addition to our voluntary initiatives, energy
suppliers also have a mandatory social obligation from Government:
an obligation to deliver 40% of the supplier energy efficiency
obligation, CERT, to households in a priority group. However,
the blurring of this social obligation with a carbon reduction
target creates inefficiencies for both objectives, and we believe
that a separation of the carbon and social obligations would have
a greater impact on both. Whilst the opportunity to achieve this
for CERT has now passed, we are keen to see this separation in
place for 2011.
2. If you have increased or plan to increase
prices, what is the scale of the increases you have announced
or anticipate and what are the underlying reasons for your strategy?
With effect from the 18 January, EDF Energy
has announced an increase in our gas and electricity prices, with
electricity rising by 7.9% and gas by 12.9%. This will impact
a typical dual fuel customer by just over £1.92 per week.
Raising our prices is one of the biggest decisions
that we have to make and is not taken lightly. However, we have
had to increase our prices because of three factors. Firstly,
the wholesale price of energy has doubled over the last year.
Secondly, the distribution costs of transporting and metering
energy have also risen.
Finally, there have been significant cost increases
from meeting our environmental obligations, including a major
expansion of the Government's Energy Efficiency obligation on
suppliers [CERT), which we fully support, but which has doubled
from 2008. Even so, in arriving at our decision, we are very mindful
of the competitive nature of the market; there is no automatic
entitlement to recover the extra costs that we incur.
Our price increase is applied in an equitable
way to all our tariffs and we have been careful to ensure that
this does not penalise our prepayment customers.
3. The Government's decision on nuclear power
You also requested comments on the Government's
decision on nuclear power and on the likely implications for investment
in a new generation of nuclear power stations, and on investment
in other conventional and renewable generation capacity.
EDF Energy welcomes the Government's announcement
as a major step in opening a new era of energy policy. It will
enable nuclear power, as part of a diverse energy mix including
renewables, gas, clean coal, and greater energy efficiency, to
continue in the future to make a major contribution to the three
key challenges of security of supply, climate change and affordability
of UK energy supplies.
Most of the current nuclear and coal capacity
will close over the next 15 years, leaving a prospective capacity
gap of at least 15GW by the end of 2015 and at least 33GW by 2025.
At the same time the challenge of climate change will continue
and increase.
The Government's decision following its extensive
consultation is therefore timely. We are pleased that the Government
recognises the need for facilitative action in respect of a number
of issues. These include assessment of current new reactor designs,
the availability of suitable sites, the need for a robust long
term carbon price signal and the streamlining of the planning
system. There is also a need, which is being addressed by the
Energy Bill, for clear arrangements for the operators of new nuclear
power stations to set aside funds to pay for the cost of decommissioning
and of managing the waste produced by these plants. We will be
working with the Government and oterh interested parties to ensure
that these issues are resolved in a timely way, so that the right
framework for investment can be put in place.
EDF Energy has announced that it is keen to
take part in building up to four new nuclear stations. Contingent
on the Government's decision we have been working for nearly two
years on plans to commission the first of these by 2017, using
the EPR design. Following the Government announcement we are stepping
up our plans to deliver.
We expect to achieve this in partnership with
others. This will be a UK project and it will be delivered with
British skills and companies. It will be a project to meet the
needs of energy users in this country. In implementing these plans,
EDF Energy will also draw on the experience of EDF Group, the
world's largest nuclear operator with 58 plants. By drawing on
this experience and working in partnership with others we are
confident that new plants can be built and run safely and economically
without subsidy—covering all the costs associated with construction,
operation, decommissioning and waste disposal.
Throughout this new phase we are committed to
maintaining openness and transparency both now and in the future.
At the heart of this is our unreserved commitment to safety, already
proven by our track record.
EDF Energy has committed to reduce the carbon
intensity of our electricity generation activities by 60% by 2020.
Based on the current generation of our fleet, that represents
almost 12 million tonnes annually by 2020. This measure formed
part of EDF Energy's "Climate Commitments", which represent
the biggest package of environmental initiatives launched by any
major UK company.
As part of our commitment to a diverse mix,
EDF Energy and our affiliates will be investing in 1.000MW of
UK renewable energy production by 2012. In this regard, we have
recently received consent for a 90MW offshore wind farm at Redcaron
Teesside.
We have also recently received consent for a
new 1300MW gas CCGT plant at West Burton. This is due to be commissioned
in 2011 and will make an important contribution to meeting the
needs of our customers.
I hope this information is helpful to the process
of your inquiry. We will of course be very happy to provide any
further detail you require. If we can be of any further assistance,
now or in the future, please do contact my colleague Kaa Holmes
on 020 7752 2179 who will be able to assist.
24 January 2008
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