Utility Week

UTILITY WEEK | 30TH NOVEMBER - 6TH DECEMBER 2018 | 17 This week Ofgem confirms RO shortfall is £58.6m Mutualisation will transfer money to suppliers that met more of their obligation with ROCs Ofgem has confirmed the remaining shortfall in Renewables Obligation (RO) late payments for 2017/18 is £58.6 million. The regulator has launched investigations into failed sup- plier Spark Energy and Economy Energy over non-payment and proposed new financial and customer service tests for suppliers seeking a licence. Ofgem revealed in October an "unprecedented" 34 suppliers collectively owed £102.9 million in buyout payments. They had until the end of the month to make late payments. The regulator announced a mutualisation process would be triggered for the first time ever aer the out- standing payments following the final deadline exceeded a threshold known as the relevant shortfall. It has now confirmed the level of the shortfall at £58.6 million, although the figure is subject to a review by an auditor. The effect of the process will be to transfer money away from suppliers who failed to meet their obliga- tion in full and towards suppliers who met a higher proportion of their obligation by presenting Renewables Obligation Certificates (ROCs) to Ofgem. Spark Energy disclosed it had missed £14.4 million in late RO payments. An industry source told Utility Week Economy Energy is responsible for around £17 million of the shortfall. Two other non-compliant suppliers – URE Energy and Eversmart – have been given until 31 March 2019 by Ofgem to make outstanding payments through monthly instalments. TG & AJ ENERGY Centrica expects cap to cut profit by £70m Centrica expects its profits to be reduced by £70 million in the first quarter of 2019 due to the introduction of the price cap on default tariffs at the beginning of January. In a trading update, the Brit- ish Gas owner also revealed it lost 372,000 domestic energy sup- ply accounts in the four months to the end of October aer the supplier announced a 3.8 per cent increase to its standard vari- able tariff (SVT) over the summer – its second price hike this year. Nevertheless, Centrica expects adjusted operating profit and earnings before interest, tax, depreciation and amortisa- tion (EBITDA) to be higher in 2018 than in 2017. Adjusted oper- ating cash flow is expected to be between £2.1 and £2.3 billion. The price cap will be set at £1,137 per year for a typical direct debit customer – £68 less than British Gas's current SVT. ELECTRICITY £60m allocated to next CfD auction The government has provision- ally allocated £60 million of annual subsidies to the third con- tracts for difference (CfD) auction due to take place in May 2019. Speaking in the House of Commons, energy and clean growth minister Claire Perry said the funding would form part of a new sector deal for offshore wind that the government is "in the final stages of concluding". She said it would also include "a series of substantial commit- ments" from companies in the sector to increase the amount of money they spend in the UK. According to the dra budget notice for the auction, the administrative strike prices for offshore wind – the maximum at which developers can secure a contract – have been set at £56/ MWh and £53/MWh respectively for projects commissioning in 2023/24 and 2024/25. WATER Dry weather costs Severn Trent £10.1m The dry weather in summer 2018 cost Severn Trent an additional £10.1 million in the first half of the year to help meet a 22 per cent increase in demand. In its half-year results to 30 September 2018, the company said it expects to spend the same amount over the following six months to "support the opera- tional recovery from the event". Turnover for the regulated water and wastewater segment of Severn Trent was £822.5 million, compared with £789.9 million in the same period of 2017/18, and underlying profit before tax was up marginally to £279.2 million. Cloud over renewables: investigations launched Finance & Investment Stock watch 850 800 750 700 650 PENNON SHARE PRICE, 27 NOVEMBER Jul 2018 Sep 2018 Nov 2018 PENNON SHARE PRICE, SIX MONTHS Pennon Group, South West Water's parent company, released its half- yearly results on 27 November. The group reported an increased statutory profit aer tax of £116 million, up from £112.3 million in the same period last year. Despite the group reporting increased revenues of £746.7 million, up from £723.9 million last year, shares took a dip. At 9am they stood at 774.4 p but 10 minutes later had fallen to 766.8p. 780 775 770 765 760 755 10:00 12:00 14:00 16.00 pence pence

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