Ofgem — the independent gas and electricity regulator — has published its review of network charges; despite repeated warnings from UK Steel, which represents the steel industry, it recommends reforms that will significantly increase electricity costs for steel-makers.
Initial analysis suggests electricity price increases up to 10% for many steel producers, adding to the industry’s ‘competitive burden’, particularly as research conducted this year shows that UK steel producers already pay 60% more than their German counterparts and 80% more than their French ones.
UK Steel said that steel is a highly electro-intensive and trade-exposed sector, with electricity representing the largest single cost for many producers (after raw materials).
“The steel sector faces annual electricity costs of £125 million, and the UK’s disproportionately high power prices continue to reduce available capital and deter inward investment, undermining the sector’s ability to be competitive today and through to the long term.
"Higher electricity costs for the steel sector will lead to higher steel prices and thus — ultimately — more imports from China and Russia.”
Gareth Stace, UK Steel’s director general (
www.makeuk.org/about/uk-steel), added: “We have time after time alerted Ofgem of the direct impact of their proposed reforms on the steel sector, but — unbelievably — our warnings have fallen on deaf ears.
"The independent regulator has completely failed to take industrial concerns into account and is set to worsen the business environment for UK steel-making and energy-intensive industries.
"It is evident that the UK steel sector is facing significant challenges at present.
"Decisions of such magnitude should not be left entirely in the hands of a regulator with no ability for Government to intervene to correct counter-intuitive proposals such as this.
"The next Government must get to grips with this immediately.”