Energy Companies Could Set Back Economic Recovery
Energy companies could derail the economic recovery by following policies which discourage industries from opening new factories.
The Government hopes that the manufacturing sector will help the country to rebuild the economy but energy suppliers are demanding upfront payments for power to new factories. This upfront payment is deterring manufacturers from opening new factories and therefore creating more jobs.
Over the last year business electricity prices and business gas tariffs have increased which has had a detrimental effect on many industrial energy users and as a result some of them have had to shut down plants or relocate their factories abroad.
Businesses which tend to use a lot of energy include those manufacturing ceramics – kilns require an enormous amount of power to function. According to The British Ceramics Confederation some of its members have been asked to pay as much as £200,000 as a deposit before an energy company would be willing to take them on as a customer. This is the equivalent of four months energy.
Speaking from the Confederation, Laura Cohen, said “Five of our members have closed in the last few weeks. Members tell me they have seen their energy costs increase considerably in the last year, typically by 30% or more, and in one case doubling”.
Some have admitted that they have given up plans to open new factories because they have been put off by the upfront energy costs.
However, ScottishPower defended their position. The energy provider said it was right that they should carry out a credit check on a company before supplying them with power adding, “Depending on the results of the credit assessment, ScottishPower may require a security deposit in order to make an offer of a contract. To enter into a long-term commitment to supply power, it is prudent to be satisfied that the terms of the contract can be met”.
Meanwhile RWE npower said it may ask for an upfront payment if the company concerned is regarded as a credit risk. A spokesman for the company said “With mid-market and commercial customers we [also] provide a service and work with them to help gain financing for a new power supply”.
Utility Exchange reported recently that in his Autumn Statement, the Chancellor had promised to help energy intensive industries to meet new energy regulations. Manufacturers in countries such as Germany have cheaper business gas prices and electricity prices than those in the UK. The Chancellor will put aside £250m to help these high energy users which currently pay around 10% more for their energy than rivals in Germany.