Utility Week

UTILITY WEEK | 14TH - 20TH DECEMBER 2018 | 13 Policy & Regulation looking network charges and connection arrangements. At the same time, it outlined the scope of yet another wide-ranging review looking at industry codes and governance in general, saying there is a "growing industry consen- sus" that the present arrangements have become outdated and a barrier to progress. With the regulator already warning that it is going to be hard-nosed at the next price review, starting in 2021 for electricity trans- mission and gas, and 2023 for electricity dis- tribution, network companies know they are in for a tough time. The regulator proposed to rein in net- works profits by, among other things, sub- stantially reducing the cost of equity. It also proposed a reduction in the length of the price controls from eight to five years to reflect the growing uncertainty faced by the sector. Gas networks are hoping that hydro- gen offers them a future. In May, Cadent announced its intention to invest £900 mil- lion in a hydrogen network in the North. And in November, Northern Gas Networks released the blueprint for a much larger £22.7 billion network. The report also proposed extending the network to a further 12 million homes by 2050 via a six-stage rollout. Whether this roadmap to decarbonisation is followed remains to be seen. Energy retail Take a tough market, add a price cap… Adam John A total of eight small suppliers have ceased trading this year. Pressure from the market was perhaps the strongest nail in the coffin, and that pressure was perhaps most clear when Ofgem released the names of suppliers who had missed the 31 October late payment deadline for their Renewables Obligation (RO) payments. An "unprecedented" 34 suppliers missed the original 1 September deadline, and of these 14 missed the final payment deadline with a £58.6 million shortfall. The shortfall resulted in mutualisation being triggered for the first time ever, meaning compliant and partly complaint suppliers will have to pick up the bill. This year also saw Ofgem set the long- awaited price cap, at just £1 higher than planned when it confirmed the final price of £1,137 in November. The cap is due to come into effect on 1 January but the first update will be announced in February 2019, to take effect in April. It will then be updated every six months, and could reignite rows over energy prices. The merger between energy giants SSE and Npower was given green light by the Competition and Markets Authority in Octo- ber. But the next month Npower's parent company Innogy said adjustments would have to be made to the merger because of "adverse developments in the UK market". The development throws into doubt whether the deal will proceed at all. A recent report by the National Audit Office said the government's original ambi- tion 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". Neither revelation was surprising. The rollout continues to be criticised by a number of industry voices, with many con- cerned about the interoperability of first-gen- eration SMETS1 devices. However, the Data Communications Company has given assur- ances that a soware upgrade to its network will resolve this issue. Expect to hear more about that and other issues surrounding smart meters during the course of 2019. Water sector Storm clouds are gathering – both real and metaphorical. Katey Pigden The past year has been a perfect storm for the water industry. Weather extremes are increasingly becoming the norm and the cracks of an ageing infrastructure are start- ing to show. If water companies were hoping to quietly go about delivering quality water to custom- ers while head office teams focused on the final details for their PR19 business plans in 2018, Mother Nature had other ideas. The Beast from the East unexpectedly plunged the country into arctic conditions. And the subsequent rapid thaw caused wide- spread disruption to the network that le more than 200,000 people without water for up to four days. Ofwat instructed water companies across England and Wales to submit plans detailing Trending in 2018… #smartmeters #electricvehicles #smallsupplierstruggles #SSENpowermerger #regulationreview continued overleaf £60m amount allocated to May 2019 contracts for difference auction £1bn capacity market payments for this year 3.8GW capacity of cancelled Moor- side Nuclear Plant 14.9GW record electricity was gener- ated from wind between 6.00pm and 6.30pm on Wednesday 28 November 50% water sector commits to halve leakage by 2050 £8.4bn amount water renationalisa- tion could cost public 184,017 number of water retail switches so far (figures cor- rect 1 October) 3 days in April, Britain was powered without the use of domestic coal generation for more than three days in a row THE YEAR IN NUMBERS

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