Environmental Audit Committee

30 July 2002


A Sustainable Energy Strategy? Ofgem's First Year Review of NETA

The EAC's recent Report on A sustainable Energy Strategy highlighted concerns about the environmental impact of recent changes in the electricity market, the New Electricity Trading Arrangements (NETA) in particular in terms of carbon dioxide emissions.  But Ofgem's review of the first year of NETA, published on 24 July 2002 ignores its environmental impact.

John Horam MP, the Chairman of the Environmental Audit Committee, commented:

"I regard Ofgem's review as completely inadequate.   Carbon dioxide emissions from the power generation sector have increased in the last two years from 41 to 44 million tonnes of carbon, partly through the increased use of coal and 'part-loading'. In view of the fact that electricity sector emissions are rising rather than falling, in direct contradiction to DTI predictions, there is an urgent need to examine the environmental impact of NETA and recent market changes.

"But there is not a single mention of carbon dioxide emissions throughout Ofgem's entire report - not a single place where the environmental impact of NETA and recent market changes is discussed.   It seems extraordinary that Ofgem can publish such a review without any reference to this issue or any proper ex post appraisal.  This vividly demonstrates the low priority Ofgem currently accords to environmental issues, and it also bears out our concern that Ofgem appears to be both judge and jury when it comes to conducting such reviews.

"The Government has set a domestic target of a 20% reduction in carbon dioxide by 2010.  Yet here we have a situation where one policy - NETA - appears to be working in direct opposition to what the Government is trying to achieve.  We are also concerned about just how 'factual' Ofgem's review in fact is.   I have certainly seen other figures to suggest that CHP is not doing as well as Ofgem suggests, and the figures it quotes for small renewable generation will need to be scrutinised closely."

Notes to editors

1.    The Environmental Audit Committee published its Fifth Report of Session 2002-03, A Sustainable Energy Strategy?  Renewables and the PIU Review,  on 22 July 2002.   A copy of the report can be found at http://www.parliament.uk/parliamentary_committees/environmental_audit_committee/reports_and_publications.cfm

Paragraphs 79 to 82 of the report discuss the environmental impact of recent market changes.   Paragraph 120 also contains a relevant recommendation.

2. Ofgem's first year review of NETA was published on 24 July 2002.  A copy of the report can be found at 
http://www.ofgem.gov.uk/temp/ofgem/cache/cmsattach/1231_24july02v1.pdf

3. Data for carbon dioxide emissions from the power generating sector is available on page 39 of DTI's March 2002 edition of Energy Trends, available at: http://www.dti.gov.uk/energy/inform/energy_trends/2002/mar_02.pdf