Utility Week

UTILITY WEEK | 3RD - 9TH AUGUST 2018 | 11 Policy & Regulation This week High debt water firms could share £230m Water companies with excess debt must share any benefits they accrue with customers The most highly geared water companies could be forced to share up to £230 million with customers between 2020 and 2025, because of reforms con- firmed by Ofwat on 31 July. The regulator revealed changes to its PR19 methodology last month, with a package of reforms aimed at ensuring the decisions water company boards reach on debt levels, dividends and executive pay "align more closely with their customers' interests". The reforms will mean any water company that con- tinues to have debt "substantially in excess" of the level used by Ofwat to set price controls will be required to share any benefits it accrues with customers. With a month to go until business plans must be sub- mitted to the regulator, water companies must outline how they will approach sharing benefits with customers. Ofwat chief executive Rachel Fletcher said: "With this package of reforms, we are reducing the incentives for financial engineering, making sure that any companies which do benefit from high levels of debt share any gains with customers. At the same time we are ensuring that water companies are open and transparent about what they pay out to their top executives and their inves- tors. This openness is essential for customers to have confidence in their water company." The reform package will also require water compa- nies to clearly show how they are linking performance- related executive pay to "stretching performance" for customers. Business plans for the 2020-25 period must be submitted to Ofwat by 3 September. KP ENERGY Ofgem's panel settles one case in 2017/18 Ofgem's enforcement decision panel (EDP) took action against just one company in 2017/18, but expects to make "significantly more decisions" in the next 12 months. The regulator has a "busy enforcement pipeline" for the coming year, the EDP said in its latest annual report. During the period, the panel issued a settlement mandate to E (Gas and Electricity) for its failure to comply with standard licence conditions including the sales and marketing objective and arrangements for site access. The energy supplier agreed to pay £260,000 to Ofgem's vol- untary redress fund and the case was closed in January 2018. The EDP takes enforcement decisions on behalf of the Gas and Electricity Markets Authority, to which it is directly account- able. Since it was formed in 2014, it has collected £132,750,001 in penalties and redresses. ELECTRICITY Corbyn: cuts to solar 'short-sighted' Jeremy Corbyn has pledged that support of renewable energy will be a key plank of Labour's industrial strategy. In a speech in Birmingham on 24 July, launching Labour's "Build it in Britain" campaign to support British manufacturing, the opposition leader singled out cuts to solar subsidy as an example of what he described as the current government's short- sighted approach to industry. He said the UK solar industry is "falling back as the industry takes off across Europe" and claimed that between now and 2022, France is forecast to add five times and Germany ten times as much solar capacity as the UK. WATER Efficiency ambitions 'weakened', say MPs MPs have accused the govern- ment of weakening its ambitions to improve water efficiency in a wide-ranging report on how the UK must step up its heatwave adaptation efforts. The report, published on 26 July by the House of Commons environmental audit commit- tee, says temperatures of 38.5 degrees are likely to be the norm by the 2040s due to greenhouse gas induced climate change. The UK's water supply is expected to reduce by 4 to 7 per cent, the report forecasts, but states that while it is expected that there will be less water available per person in the future, the government missed an opportunity to ramp up sup- ply efficiency standards when it published its 25-year environ- ment plan earlier this year. Fletcher: cracking down on financial engineering Political Agenda David Blackman "FIT subsidy axe wasn't even presented to parliament" At Westminster, they call it "putting out the rubbish". The last day of each parliamentary session generally sees a mass of announcements from the gov- ernment. The suspicion is that by rushing out its business in a job lot, ministers will ensure that obscure but nevertheless politi- cally unpalatable announce- ments will be drowned out. The House of Commons adjourned on 24 July. For some, the Department for Business, Energy and Industrial Strategy's mechanism has underpinned the dramatic expansion of solar provision that the generation system has been benefiting from handsomely during the recent hot weather. The latest BEIS energy digest, published last week, set new records for the share of elec- tricity generation powered by renewable energy. However the current investment pipeline gives little grounds for confi- dence that these improvements can be maintained. contribution to the end of term bin round was secretary of state Greg Clark's announcement that Cuadrilla had finally won permission for its plans to carry out test fracking for gas on a site outside Preston, Lancashire. It capped a miserable few days for clean energy champi- ons, who had been downcast since the previous week's pub- lication of a consultation paper spelling out curtains for small- scale renewable projects when the feed-in tariff (FIT) regime ends next March (see page 14). Unlike the fracking announcement, the FIT subsidy axe wasn't even presented to parliament, even though the

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