Offshore transmission scheme slammed as uncompetitive

The UK’s licensing system for ownership of power lines linked to offshore wind farms has been slammed by an influential government committee.

In a report out yesterday, the Public Accounts Committee attacks the Offshore Transmission Owner regime, stating that it has “been designed almost entirely to attract investors at the expense of securing a good deal for consumers” and adds that “it is shocking that the Treasury allowed it to proceed”.

So far, six licenses have been awarded – and all have been won by one of two companies. Transmission Capital Partners have secured four licenses, while the other two have gone to Blue Transmission.

This, says the PAC, shatters any notion that there is a competitive market involved.

Committee chairwoman Margaret Hodge said: “Not only is it unlikely that this new licensing system for bringing electricity from offshore wind farms onto the national grid will deliver any savings for consumers, it could well lead to higher prices.

“Indeed, the terms of the transmission licenses appear to have been designed almost entirely to attract investors at the expense of securing a good deal for consumers.  Licensees and their investors are provided with a guaranteed income for 20 years regardless of the extent to which the assets are used.”

She said future payments to licensees “are estimated at around £17bn, and this will ultimately be funded by customers who could well end up paying higher electricity prices”.

Hodge also attacked the fact that the most operators can be fined if their facilities are not available and working is just 10 per cent of their income in any one year.

She said that in setting up the regime, the Department for Energy and Climate Change and the Gas and Electricity Markets Authority had “ignored vital lessons from previous government experience of PFI [private finance initiative], such as the need to share refinancing gains, and it is shocking that the Treasury allowed it to proceed”.

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