An application for a non-domestic U.K. electricity supply has been made by BES Commercial Electricity Ltd, the U.K. energy regulator Ofgem said Monday.  BES Commercial Electricity is affiliated with Business Energy Solutions Commercial Gas. BES Commercial Gas Ltd is an independent supplier of natural gas to the business and commercial sectors.

EDF, the French energy giant that recently bought nuclear generator British Energy, is looking at the possibility of selling its UK electricity distribution arm for up to £5 billion to cut a £22.3bn debt mountain.  It is understood that EDF, the world’s biggest producer of nuclear power, is examining the option as it spends heavily in France and abroad as part of the nuclear revival, and in the wake of a series of acquisitions. The group declined to comment. Industry sources said the French state-controlled group’s management was considering whether to focus purely on power generation. One Paris-based analyst said: “I am a little surprised. This is the first time I have heard about a possible sale of this. But this is not completely silly given EDF’s strategy to focus on nuclear production.”

EDF’s British distribution business, operated by its subsidiary EDF Energy, supplies power to nearly eight million homes and businesses in London and the south and east of England. The division generated 75 per cent of EDF Energy’s core earnings in 2008, or about 700m. City utility analysts believe the business is worth between £3bn and £5bn.

They said yesterday that a sale would help EDF meet a target of cutting debt by at least 5bn by end the end of 2010. EDF’s recent acquisitions of British Energy, whose plants include Torness and Hunterston, and half of Constellation Energy’s nuclear business, pushed its debt to 24.5bn at the end of last year.

One analyst said: “The British networks are a profitable business, and it would be far easier for EDF to sell its networks there than it would be to sell them in France.”

A sale of the company’s distribution businesses in France is seen as more likely to fuel greater political and union resistance.

It is also thought the worldwide recession will make any sale more problematic, either to another utility company or a private equity buyer.

One industry executive said: “This is not an easy sale at all. Look at other utilities like Vattenfall, which are struggling to sell (its networks].”

Swedish utility Vattenfall admitted last week that the sale of its German long-distance power grid had had to be put back.

The British power market was the first in Europe to be liberalised via widescale privatisation at the beginning of the 1990s.

Apart from its acquisitions, EDF is investing heavily in France, building a new-generation nuclear reactor and with plans for a second one. The group also wants to take a leading role in a nuclear revival in Britain, where it plans to build new plants on British Energy land.

Scottish & Southern Energy has agreed a five-year coal supply agreement with UK Coal for its West Yorkshire power station to keep transport costs down. The recent installation of flue gas desulphurisation equipment at the Ferrybridge power station means the UK’s higher-sulphur coal can be used to generate power but SSE opted to take supplies from exclusively English-based UK Coal. Under the agreement with UK Coal, Perth-based SSE will buy 3.5 million tonnes of coal between the end of this year and 2015, enough to meet around 15% of the station’s coal requirements. This will be taken from deep mine and open-cast sites, including the nearby Kellingley Colliery in North Yorkshire. One option for transport between the two locations is canal barge. SSE spokeswoman said the utility opted for the deal with UK Coal, its first contract with the company, rather than suppliers with operations further afield, because of the proximity of its sites. “This is about transportation costs. It’s not a Scottish-English thing. This is a stand-alone kind of deal and it is more about a local supplier.”

SSE does not disclose where it sources its coal from but in recent years typically around half of the UK’s coal has come from Russia, Poland, South Africa and Colombia. The price SSE pays will be linked to global coal prices, but with a ceiling and floor. SSE has agreed a secured loan to UK Coal to help it upgrade several sites. SSE will receive interest on the advance, which is to be repaid by 2014. Ian Marchant, chief executive of SSE, said: “With its higher sulphur content, the UK’s coal has previously been unsuitable for use in SSE’s power generation plants. Our investment in equipment to remove emissions of sulphur means we can now make this substantial commitment to an indigenous source of fuel, thereby supporting jobs in the UK’s mining industry.”

Marchant sought to tackle concerns about the environmental impact of coal-fired power: “We are aiming to reduce the carbon intensity of our power generation by 50% by 2020, but the secur-ity of the UK’s energy supply will continue to require a role for coal for the foreseeable future.”

The deal comes after the announcement in January that ATH Resources had won a three-year, £40m deal to provide ScottishPower with coal from its Muir Dean open-cast mine in Fife.

The contract to supply 800,000 tonnes of coal from ATH’s new Muir Dean mine to the energy firm’s nearby Longannet power station begins this month.

UK Coal said yesterday it made a pre-tax loss of £15.6m in 2008. It made a profit of £69m the year before after posting a smaller than normal gain in its property portfolio.

However, news of the contract win with SSE, as well as new or amended long-term deals with Drax, E.ON and EDF Energy boosted its shares by 8.75p, or 8.2%, to 115p.

Almost £5 billion in investment will be needed to upgrade the UK’s electricity grid network by 2020, a government report has shown. Among the extensions needed to the grid will be high-voltage subsea cable links between Scotland and England, according to the report by the Electricity Networks Strategy Group. It concluded that up to 1,000km of new cables would be needed to make sure new renewables and power stations could be connected to the grid. In Scotland, the report said up to 11.4GW of renewable generation could be expected. In order to transmit this electricity, possible measures would be the controversial upgrade of the power line between Beauly and Denny, as well as subsea links to Scottish islands. A cable beneath the sea between the Kintyre peninsula and Hunterston was also proposed in the report. In order to meet emissions targets, it is expected the UK will need to generate about 30 per cent of its electricity from renewable sources by 2020.

However, there is a lack of capacity in the existing grid network to be able to connect about 35GW of renewable power needed to meet the targets. Many areas suitable for renewables, such as offshore sites in the Pentland Firth off Caithness, are isolated, without current access to the grid. Mike O’Brien, the energy minister, said: “Having a grid which is fit for purpose is vital for our ambitions to cut carbon emissions and increase security of supply.” The report is the latest piece of work to come from the Transmission Access Review, which will ultimately reform the electricity grid structure for 2020. Alistair Buchanan, the chief executive of the gas and electricity watchdog Ofgem, said: “Getting the right electricity infrastructure in place so more renewable generators can connect is critical if the UK is to meet challenging new renewable targets.” He added: “The industry report proposes the use of technology so far unused in this country.

“This demonstrates a willingness to consider innovative solutions which could lead to faster build times and avoid the need to secure planning permission for onshore lines.”

Scottish and Southern Energy is reported to be in £11 billion takeover talks with a state-owned Swedish power giant.

The firm, which is the UK’s second biggest power company, is understood to be holding talks with Vattenfall, according to the Mail on Sunday. The move follows years of speculation linking the two groups, but the talks are thought to be at an early stage, and any takeover is understood to be depend on the outcome of an auction of Dutch energy firm Nuon. Vattenfall is currently bidding for Nuon, Holland’s second biggest energy company, and the Scottish and Southern Energy talks are reported to be a fall-back position if it is unsuccessful. Stockholm-based Vattenfall is one of the leading energy producers in northern Europe and it is has a huge cash fund for acquisitions. It is understood to have wanted to move into the UK market for some time. A Scottish and Southern Energy spokeswoman declined to comment on the speculation. No-one from Vattenfall could be contacted. On Friday Scottish and Southern Energy became the second UK energy firm to announce price cuts for its customers, following an earlier move by British Gas.

The group, which has nine million domestic customers, said it was reducing average electricity prices by 9% and gas prices by 4% from March 30, due to lower wholesale energy prices. It also said it was on course to deliver a “modest” increase in adjusted pre-tax profits on the £1.23 billion it made in the year to March 2008. The firm made £302.6 million in the six months to September 30, but expected to make the bulk of its profits in the second half of the financial year as the price hikes and higher winter demand took effect. It also plans a rise of at least 9.1% in its full-year dividend.

French energy giant GDF-Suez is circling the UK’s £40bn new nuclear market. It is tipped to make a bid for either Centrica or Scottish and Southern Energy (SSE) as part of its plans to build new nuclear power stations in the UK. The French firm is already in talks with Spanish energy giant Iberdrola about joining its recently formed joint venture with Scottish and Southern Energy. Sources say the firm is keen to extend its customer base in the UK. Buying either Centrica or SSE would answer that need. A source said: “The word is GDF-Suez plans to buy SSE or Centrica to increase its UK customer base which has only industrial clients at the moment.” However GDF-Suez is keeping its options open.

The UK faces an energy crunch leading to much higher electricity and gas bills within three years because power companies are shelving investment plans, the chief executive of Centrica has warned. Sam Laidlaw also told the Sunday Observer that unless the government increased the level of financial support available for offshore wind farms soon, the UK would have little chance of meeting its 2020 renewable energy targets. Laidlaw said the “big six” energy suppliers were in talks with government officials about how to make the economics of offshore wind power work. EDF is understood to be in favour of special rates known as “feed-in tariffs” for offshore wind farms, which guarantee operators a higher fixed price for the electricity they generate. He said: “If we have a long hiatus (because of the credit crunch) of more than a year, then it’s going to be a bigger challenge to meet our renewable targets to ensure we have security of electricity supply. We have to find some solutions in the next few months.” He added: “Investment is starting to fall off quite quickly. The big fear I have is that in two or three years, the next cycle (of high energy prices) will repeat, and security of supply will go right back to the top of the agenda, and we will be even less prepared to cope with it unless we make the investment now.”

Today is the deadline for bids for licences to operate the third round of offshore wind farms, which would cost about £50bn to build. But existing projects are already at risk of being scrapped.

U.K. utility Centrica PLC is likely to complete the purchase of a 25% stake in U.K. nuclear operator British Energy Group PLC within weeks, a person familiar with the situation said Tuesday. “Centrica’s still interested and looking to proceed with the deal, but it’s going to take a few weeks to tie it up,” the person said. Monday, Electricite de France finalized its GBP12.5 billion acquisition of British Energy. The French utility plans to build four new nuclear reactors in the U.K. from 2017. Earlier this year, Centrica signed a non-legally binding memorandum of understanding with EDF that gives it the option to acquire 25% of British Energy once the company’s sale to EDF has been completed and regulatory approvals obtained. A 25% stake of this valuation amounts to GBP3.125 billion.
Centrica is keen to have a share in new nuclear power stations in the U.K. as the company has less electricity generating capacity than its rival U.K. utilities and all of it is gas-fired.

EDF Chief Executive Pierre Gadonneix said in an interview with the Financial Times that the deal with Centrica might be completed within two or three months. “Centrica can be a partner, but it is not the only one for new nuclear,” he said. Gadonneix also called on the U.K. government to streamline its planning and safety process for new nuclear reactors or face delays in their construction. “Clearly the British government and many stakeholders are aware of the huge need for nuclear development as soon as possible,” Gadonneix said. “If we want to meet the 2017 challenge for the first EPR (European Pressurized Reactor), we must find ways to make the process as fluent as possible…That will take time and that will cost,” he said. Gadonneix’s comments follow similar demands last week from the CEO of RWE npower, the U.K. arm of German utility RWE, which is also building new nuclear power stations in the U.K.

Last week, RWE npower CEO Andrew Duff said the U.K. government and regulators need to clear the way for investment in all forms of power generation to guarantee security of supply as older coal and nuclear power stations close.

People in Jersey will pay 25% more for their power when Jersey Electricity Company raises its prices on Thursday. The company says the hike is due to “strongly rising” global energy costs and the fact that tariffs have remained unchanged over the previous two years. From January unit charges will increase by 25% and standing order and other fixed charges will increase by 5%. Bills issued after Thursday will be calculated pro-rata to take account of consumption prior to the price rise. A spokesperson for the firm, which is the sole supplier of electricity in Jersey, said that the company had “cushioned” customers from high and volatile wholesale markets and had also absorbed additional costs to the extent possible over the last two years.

However, they added that the importation costs of power had risen by more than 70%.

“For the majority of customers in Jersey, electricity prices are lower than the European average, Guernsey, Isle of Man and the UK,” the spokesperson said.

“The cost increase has been driven by a 55% increase in Euro denominated wholesale electricity costs and a 15% deterioration in the Pound/ Euro exchange rate.

“Since the time of the last electricity price rise in January 2007, the local prices for heating oil and gas have increased by approximately 60% and 35% respectively.”

http://www.jec.co.uk/

Millions of consumers and businesses are set to receive price cuts of at least 10 per cent in their gas and electricity bills early in the new year, although some may have to wait longer. After a collapse in the wholesale price of gas and electricity in recent months, Britain’s Big Six energy suppliers - British Gas, E.ON, EDF Energy, ScottishPower, npower and Scottish & Southern Energy (SSE) - plan to cut customer bills next year in a move that will be welcomed by struggling households and the Government.

SSE, which has nine million customers, is widely expected to be the frontrunner, cutting prices next month. Ian Marchant, the chief executive, announced his intention to move as early as possible in October, partly to ease mounting political and regulatory pressure on the industry to provide relief for consumers who are struggling with the fallout from the worsening recession.

However, some of SSE’s rivals, such as British Gas, E.ON and npower, are expected to hold out until at least February or March. Energy companies buy gas and power using a variety of forward hedging contracts and there is always a delay before they pass on price cuts. Some companies may also have less advantageous hedging positions than rivals, which will influence their willingness to cut. The Big Six increased retail prices twice this year, but have not passed on any of the falls in wholesale energy costs that have occurred since the summer as gas and electricity prices tracked the collapse in the price of crude oil.

The forward price of gas for delivery in the winter of 2009 has almost halved from 109p per therm in July to about 63.6p per therm. The forward price of the same contract for power has dropped from £94.50 MWhour to £56.65 MWhour.

Harriet Harman, the Leader of the House of Commons, has warned the utility companies that the Government could force them to pass on falls in wholesale prices more swiftly. “The energy companies must pass on the price cuts to consumers - both businesses and families. They must also treat all consumers fairly,” she told MPs last week. “If they don’t … we will change the law to force them to do it.”

Expectations of the size of the potential price cuts vary widely. John Hall, an independent energy analyst, who advises many of Britain’s biggest companies, said that the wholesale price of gas and electricity represents about two thirds of the total cost of supply for the Big Six.

Mr Hall said this suggested that the companies could afford to make cuts of as much as 20 to 30 per cent by the spring “provided the wholesale price does not go back up again”.

Industry sources say that the companies are wary of slashing prices too far or too quickly because of their wish to protect profit margins and because of the risk that wholesale prices could go up again.

One source close to one of the Big Six said that the preferred option would be to make a “relatively small cut in the spring. This is not going to be a case of £250 off your bill”.

He said that 5 per cent to 10 per cent was a more likely figure, although much would depend on the competitive pressures if the first to move made bigger than expected cuts.

The source added that after SSE’s expected cut, the remaining suppliers would find themselves in a “staring contest”, trying to hold out for as long as possible before cutting bills. They will want to boost their earnings during the period of peak energy demand in January and February. The companies might also choose to announce price cuts several weeks before they are applied - in contrast to the price rises this year, which took effect immediately, or within days.

Andrew Horstead, energy analyst at Utilyx, the consultancy, forecast price cuts of 10 per cent to 20 per cent. “We have seen a sharp correction in wholesale gas and power prices since July’s record levels but the drop has been less severe than the dramatic U-turn in oil prices,” he said.

“But we are expecting wholesale prices to remain depressed into the new year, reflecting the deteriorating demand outlook, and we expect utilities to reflect this by passing on drops to end-users in early 2009, possibly in January, with tariffs potentially falling 10 to 20 per cent.”