Utility shares: 'Your returns are at the whim of politicians' The Energy Bill will take government intervention to another level. Under powers granted by the bill, the Department of Energy & Climate Change (DECC) will give price guarantees to developers in those technologies and at those locations that it favours. The DECC will set the level of these guaranteed prices and thus determine how much money each asset makes, what the consumer pays and the returns on investment. The department will also decide how much reserve capacity is required to back up renewable power - and, by implication, the revenue and returns for much of the existing generation plant. All this amounts to the effective renationalisation of the investment decision process in the power sector. It is now the Government, not private companies, that will decide which power stations get built, when, where, and using what technology. The role of the power companies is reduced to facilitator for the DECC's decisions. It is arguable that even when the industry was state-owned before 1990, central government had less control than envisaged by the Energy Bill. But what is clear is that no utility will build a new power station unless the economics are formally underpinned by the taxpayer and the consumer. In taking charge of the investment-making process, the Government has to accept that the costs and risks of these decisions will also fall on to the state. It is not clear that Britain's policymakers grasp the risks and possible consequences of their current path. Political risk is bound to rise sharply in Britain's energy industry as the inherent implausibility and contradictory nature of the policy goals are exposed. Companies and investors should be wary of committing further capital in support of those goals, with the partial exception of investment in the supply network, as opposed to generation. If political risk does rise sharply in the UK in coming years, especially if it is due to a security of supply scare or a price spike, or both, we would expect the heat to centre on the so-called "big six" energy suppliers, as well as Drax, the power station operator. There is a real risk that the government of the day could be tempted to directly intervene in energy prices or utilities' profits - with obvious consequences for shareholders. Peter Atherton is a utilities analyst at Liberum Capital