Select Committee on Business and Enterprise Written Evidence


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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