Business leaders want ‘transparent’ alternative to energy price caps

Institute of Directors also calls for competition between local authorities where there are the right geological conditions for an underground radioactive waste storage facility

The next government should force energy suppliers to create a new transparent default tariff that shows customers exactly how much of their money goes on wholesale energy, transmission and other fixed costs, and how much goes on the company’s unregulated profit margin, the Institute of Directors (IoD) has declared.

In the latest in a series of reports which the business group is publishing in the lead-up to the UK general election, the IoD also called on Whitehall to convene a competition between local authorities that possess the appropriate geology” to host a new underground geological disposal facility for Britains nuclear waste.

Currently this is stored above ground, mostly at Sellafield in Cumbria – a set-up which the IoD says is far more expensive than storing radioactive material beneath the ground.

Paying for the services of the Civil Nuclear Constabulary, which provides security and is funded by the companies in charge of running nuclear power plants, is part of the reason why the current storage method is relatively pricey.

Dan Lewis, the IoD senior infrastructure adviser who wrote the report, told E&T there were between eight and 10 potential sites across the country that could host a geological disposal facility 1,000 ft beneath the surface.

But he said it was vital that the benefits of this infrastructure, in terms of job creation and the revitalising of local economies, were there for all to see in the vicinity, adding that it should “not just be viewed as being only in the national interest” but also in the local interest.

The IoD’s report states: “Above-ground waste requires additional security, safety and monitoring at all times. Nor is the waste confined to that from nuclear power stations, but will increasingly be needed for MRI scanners and other medical and industrial equipment and future small modular reactors.”

Both the Conservatives and Labour have suggested interventionist solutions to push down energy bills. But Lewis said he was against price freezes and caps, and he instead suggested regulator Ofgem could be tasked by the government with helping to highlight how much of customers money was being pumped into firms’ profit margins.

Lewis said: “There is clearly a problem, with standard variable tariffs not falling as wholesale prices fell between 2014-16. But cap or freezes don’t help competition in the long term, and we really shouldn’t trust politicians to set the price and predict the market response. Something does need to be done, however, so we would support giving Ofgem responsibility for creating a truly transparent default tariff, which enables customers to see exactly how one company’s offering compares against the others.”

The Competition and Markets Authority has found SMEs have been overpaying for their energy more than households, and the IoD says that, with more people working from home, high energy costs are having implications for those who are self-employed too.  

The report also recommends greater progress in exploiting “the UK’s bountiful shale resources” and calls for a move away from fixed subsidies of renewables to a “more auction-based system”.

On smart meters, the IoD calls for the rollout of the devices to be immediately paused and reviewed to try and get a grip on rising costs.

The report adds that “the legal obligation on suppliers to install potentially incompatible meters by the deadline of December 2020 or else pay large fines is already pushing up inflationary costs in wages and advertising”.

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