Utility Week

UTILITY WEEK | 30TH NOVEMBER - 6TH DECEMBER 2018 | 7 Policy & Regulation This week United Utilities has insisted the company has a "good plan on the table" for PR19, which will li 300,000 homes out of water poverty. Speaking to Utility Week as it posted its half-yearly results, chief executive Steve Mogford said the "ambitious" business plan has been developed follow- ing an "unprecedented degree of customer engagement". WATER United Utilities chief says it has a 'good plan on the table' for PR19 "We have offered up a 10.5 per cent reduction in real terms on average bills, which is par- ticularly important in our region. "We have high levels of depri- vation and affordability is a chal- lenge for many of our customers, but it will help li about 300,000 homes out of water poverty. "Obviously, we will wait and see Ofwat's first response by the end of January, but we are work- ing hard now to position our- selves as we come to the end of AMP6, so we are well positioned for AMP7," said Mogford. "The key for us is putting our best foot forward – we've put a good plan on the table, and it is supported by customer research and engagement. It delivers more for less. We're hopeful we will get a good hearing." Mogford also spoke of the role Smart meter rollout targets 'won't be met' National Audit Office says installation of extra 7.1 million SMETS1 meters has hindered programme A report by the National Audit Office (NAO) has warned that the government's original ambition of offering a smart meter to every home by 2020 will not be met, while the cost of the rollout will likely "escalate beyond initial expectations". The government also "under- estimated" how long it would take to implement the infrastructure of SMETS2 smart meter devices, according to the spending watchdog. Suppliers have now installed 12.5 million SMETS1 meters – 7.1 million more than originally intended. The report says this is an "unintended consequence" of trying to install smart meters quickly and that the government decided upon this strategy without first making an economic assessment of its implications. It says the mass rollout of SMETS1 meters has added to the complexity and cost of the programme. The NAO says because the start of the rollout of the more advanced SMETS2 meters was delayed by more than three years, sticking to the 2020 deadline is putting "increasing timetable pressure" on the programme, thus increasing the risk of cost escalation and the technology being rolled out before its defects have been addressed. Furthermore, the report found "important gaps" in the tracking of costs and benefits because the Depart- ment for Business, Energy and Industrial Strategy has not updated its analysis since 2016 and is not monitoring whether the intended energy savings are being achieved. The cost of the smart meter rollout was estimated to be £11 billion in 2016, with £16.7 billion of economic benefits. The NAO says this "underestimates" the true cost of rolling out the devices, which has since risen by at least £0.5 billion – or an extra £17 per household. AJ ELECTRICITY Ofgem proposes tougher supplier licensing tests Ofgem has proposed new finan- cial and customer service tests for companies seeking a supply licence following increased complaints and an unprece- dented shortfall in Renewables Obligation late payments. Under the proposals, firms would have to demonstrate they have "adequate financial resources" and can meet their customer service obligations before being awarded a licence. This means they would have to provide the regulator with a plan to meet its handling standards and obligations to assist custom- ers in vulnerable circumstances. Ofgem is also consulting on tightening its test of whether applicants are "fit and proper" to be granted a licence. The regulator said the meas- ures, which should be in place by late spring next year, will help "ensure new suppliers are ready to enter the market", while still driving competition and innova- tion that benefits consumers. As part of its ongoing review of licensing arrangements, Ofgem will consult separately next year on proposals to intro- duce new reporting requirements for suppliers that are already active in the market. This would include submitting information on the adequacy of their finan- cial and operational resources for running their business, provid- ing customer service and meet- ing their financial obligations under government schemes. This, Ofgem says, would "reduce the risk of disorderly supplier exits" by raising standards around financial resilience. ENERGY Minister defends exclusion of onshore wind from auctions Claire Perry has insisted the ongoing lack of government support for new onshore wind- farms will "not impede" the UK's ability to meet its renewable energy targets. The energy and clean growth minister was quizzed by the Business, Energy and Industrial Strategy Committee last week about the exclusion of onshore wind and solar from contracts for difference (CfD) auctions. The committee was conducting a hearing on progress on the Clean Growth Strategy published just over a year ago. The minister defended the government's policy, which was enshrined in the Conservative party's 2017 general election manifesto, telling the committee three times she does not believe in breaking promises to the electorate. "We were elected on a manifesto with a commitment and I believe in keeping commit- ments," said Perry. "It does not impede our ambition with our renewable targets and it has allowed us to focus on [offshore wind] that is delivering increases in yields and cost reductions." Counting the cost: £17 more per household artificial intelligence is playing in improving service delivery. "Not only will it improve the efficiency of the way we operate our water networks, it will also save us £10 million across the business." In its half-year results to 30 September, United Utilities reported an underlying operat- ing profit of £367.8 million, up from £344 million in the same period last year.

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