We welcome the leadership shown by the UK Government and by the EU in committing to long term targets for reducing greenhouse gas emissions during 2008. In the UK the Climate Change Act set a target for reducing ghg emissions by 80% by 2050 on 1990 levels. In December the Climate Change Committee proposed carbon budgets for the period 2008 to 2020 and recommended that the power sector should be significantly decarbonised by 2030 to support decarbonisation of the rest of the economy, including heat and transport. We support this broad approach.

Creating an energy supply industry that emits significantly less carbon requires huge investment and, if we are to ensure that the interests of our customers and the UK's economy are protected carbon emissions will need to be reduced in the most effective and efficient way. We also need to use a diverse range of low carbon technologies – including nuclear, renewables and coal with carbon capture and storage - to help ensure security of supply and avoid over-reliance on any single source.

The EU Emissions Trading Scheme (EU ETS) is in our view the most efficient delivery mechanism for reducing carbon emissions in sectors where there are large sources of emissions such as power stations and industrial plants. During 2008 the European Commission proposed, as part of its ‘Green Package’, new targets for the EU ETS after its current phase expires at the end of 2012 and agreement was reached on this in early 2009. This imposes a cap in 2020 21% below 2005 emission levels but this will be tightened further if an international agreement is reached at Copenhagen in December 2009. We believe a tighter cap is needed both to help ensure EU ghg emissions are reduced in line with global requirements and incentivise investment in low carbon technologies.

Some lower carbon technologies, such as renewable technologies or carbon capture and storage, require additional support beyond that provided by the EU ETS. During 2008 the Government consulted on how the target proposed by the European Commission for the UK in the EU Renewables Directive – that 15% of final energy consumption should come from renewable sources – should be delivered in the UK and confirmed its strategy in 2009. We believe that renewable electricity can make the largest single contribution to this target but that very high levels of wind generation can create difficulties for investment in other low carbon generation technologies which will need to be addressed. The Government sought views on this issue during 2009 .

We also believe that nuclear power has a significant role to play in meeting security of supply and climate change goals and we were pleased to see that the Government confirmed its view that new nuclear construction had a role to play in the UK’s energy mix in the White Paper it published in January 2008.

Effective policies are also needed to encourage much more efficient use of energy by consumers, including residential and smaller commercial customers, and to support the development of renewable heat and renewable electricity and small scales. We contributed to the development of Government policy on renewable heat and energy efficiency strategy in 2008 and in 2009.

The UK is currently entering a significant investment cycle as a large proportion of the UK’s coal, oil and nuclear capacity will close over the next fifteen years and this is coinciding with the need to radically reduce the carbon emissions from energy supply. The amount of new infrastructure needed by the energy supply industry to achieve both of these objectives will mean a paradigm shift in the amount of new energy infrastructure that must be built across the UK year-on-year to 2020 and beyond.

It is therefore vital that there is confidence in the long-term stability of the market. Energy policy that only looks to short-term political pressures tends to undermine long-term stability, and investor confidence. E.ON strongly supports policy stability as far as is possible to ensure that there is sufficient confidence in the market to produce the required levels of investment.

Of particular importance to delivering both security of supply and climate change goals is a planning system which can give developers confidence that their application to build a project will be considered and a decision reached within a reasonable and predictable timescale and that the criteria that will be applied are transparent and well understood. We therefore strongly supported the reforms proposed by the Government in the Planning Act 2008 which established an Infrastructure Planning Commission (IPC) which will reach decisions on major infrastructure projects in accordance with policies set out in National Policy Statements which will be subject to consultation with the public and Parliament. The IPC will start considering applications for new projects from 1 March 2010.

We believe that competition continues to be the best guarantee of affordable prices to consumers and we support an approach which focuses on competitive markets with more direct regulation of monopoly networks businesses. Prices in the market do however need to reflect the need for the new investment to deliver security of supply and climate change goals. Prices will also be influenced by global factors such as the price of gas which is significantly influenced by the oil market. This was a major factor affecting energy prices in 2008.

lt is important that energy prices are affordable to customers of all income levels and those in fuel poverty need more protection when prices are rising. In April 2008 energy suppliers reached an agreement with the Government to increase their level of support for customers in fuel poverty over the period to 2010/11. In September 2008 the Prime Minister announced a package of initiatives designed to help people to reduce their fuel bills whilst also ensuring that the most vulnerable received help that winter. This included a new Community Energy Saving Programme which imposes an obligation on suppliers to deliver energy efficiency and related low carbon measures in particularly deprived areas. E.ON contributed to the development of this new policy and to changes to the Carbon Emissions Reductions Target which is also significantly focussed on the fuel poor. These new policies took effect in 2009.

We seek to engage with a range of stakeholders and with the Government so that they understand the needs of our own business and the decisions we take but also so that we can take account of our stakeholders’ views as we develop our own thinking on energy policy . We do not have policies specific to the conduct of public affairs or for input into public policy making. Our views on major policy issues are expressed in documents which are available on our website (such as responses to formal Government consultations or Select Committee inquiries); or are on the public record elsewhere (such as Government departmental or Parliamentary select committee websites). Our views on policy issues are also communicated in writing to managers and other staff internally.

We monitor legislative and energy policy trends and changes in the UK, and review any new developments that might affect us as a business.

Our work in these areas includes the following:

• responding to consultation papers issued by Government departments or regulatory bodies;
• submitting oral and written evidence to parliamentary select committees;
• discussion with Government departments and the Office for Gas and Electricity Markets (Ofgem);
• dialogue with non-governmental stakeholders such as environmental NGOs;
• individual meetings and briefings for key MPs and peers on energy policy;
• briefing MPs and peers on energy-related legislation, as appropriate;
• speaking at conferences and seminars;
• participation in trade association activity.

The UK Government is one of our primary stakeholders and we pay particular attention to its objectives. In general our lobbying focuses on how to deliver the Government's goal of secure, affordable and low-carbon energy supply most effectively. Engagement with EU institutions is generally conducted on behalf of the group by the E.ON group’s representative office in Brussels.

Policy positions developed in response to major Government consultations are subject to agreement by the E.ON UK Board and, where appropriate, the senior management of E.ON group-wide businesses operating in the UK. Our Director of Regulation and Energy Policy is responsible for our energy policy work and relations with Government departments and she reports to E.ON UK’s Director of Corporate Affairs. Our Director of Brand and Communications is responsible for the conduct of relations with MPs, the media, internal communications, and reports to the Chief Executive.

In February 2008 Ofgem launched a study into the GB energy supply markets, which became known as the Ofgem Energy Supply Probe. The initial findings from the probe were published in October 2008 where Ofgem found that the market was competitive; that it worked well for most customers and that there was no collusion between suppliers. However, it did find that certain groups of customers did less well out of competition than others. This led both to voluntary action being taken by suppliers such as E.ON to change their pricing and also to a number of proposed new licence conditions, relating to non-discrimination between customers and to greater transparency and provision of information, which were accepted by suppliers in 2009.

We have supported Ofgem and worked alongside other energy suppliers and stakeholders to develop a set of voluntary guidelines for green energy products. These are designed to give customers reassurance on the environmental benefits of green products. Confirmation that an energy product meets the minimum standards of the guidelines will be provided through verification scheme developed by energy suppliers which is due to launch later in 2009. Energy products that comply with the guidelines will carry an easily identified logo.

Our distribution business Central Networks has hosted a number of two day workshops for both Ofgem staff and staff from other external organisations to give an overview of a distribution network, including basic electrical principles, distribution equipment, connection arrangements and safety presentations. This course is specifically designed for non-electrically trained people that may require a certain level of understanding of the distribution business to enable them to carry out their duties more effectively.

The New Connections Team, which became part of Central Networks, has responded to proposals from Ofgem in its Review of Competition in Gas and Electricity Connections. The team has adapted its processes and procedures to embrace the best practices put forward, for example streamlining the applications process, increasing customer awareness of the service and the choices they have and the appointment of key account managers. This has included proactively seeking feedback from customers to feed into a Net Promoter Score which is a measure of customer satisfaction.

We have been actively working with the Government, Ofgem and the industry in a number of areas in order to promote improved access to networks for renewable generation, both onshore and offshore. We have contributed to the development of the new licensing and commercial arrangements required for new offshore electricity transmission networks. Our focus has been to maintain support for the high level policy decisions that have already been taken whilst providing suggestions for operational improvements and guidance on undecided policy issues.

We have also been fully involved in work to reform the transmission access arrangements onshore. This has meant attendance in a large number of industry work groups dedicated to producing new models for reform, as well has meetings with Government and Ofgem to explain our views. Additionally, we have directly participated in the work of the Electricity Networks Strategy Group in order to promote more strategic investment in network capacity. Our aim has been to provide practical solutions that will promote faster connection and a stable investment climate for new generation projects, whilst ensuring that customers are protected from excessive increases in costs.

In 2007 the Competition Commission upheld our appeal against Ofgem’s decision to implement a Uniform Network Code Modification. Ofgem were required to reconsider their decision which would otherwise have radically changed the terms for access to the gas transmission system for large customers, storage and interconnector users and generators.

As a result of detailed discussions with the both the wider industry and Ofgem an alternative proposal put forward by E.ON was accepted by Ofgem. This compromise addressed the main concerns network users and their customers had with the original proposal which were largely to do with costs and complexity), whilst at the same time providing the safeguards on ‘user commitments’ and management of transmission system that they had been sought by Ofgem. Development of and lobbying for the E.ON proposal was managed by UK Regulation and Energy Policy in close liaison with colleagues from Generation, E.ON Energy Trading, and E.ON Gas Storage.