Utility Week

14 | 14TH - 20TH DECEMBER 2018 | UTILITY WEEK Policy & Regulation I t's conceivable that at some time in the past, a round-up of the year for the energy industry might have concluded it had chugged along nicely without any great drama or upheavals. For many reasons, 2018 has not just chugged along though. The past 12 months have undoubt- edly been challenging for many, but there is no doubt in my mind that as we look out to the 2020s the future for our sector is fantastically excit- ing, with technology developing at such a speed that the opportunity for disruption in every part of the sector is huge – and the benefits for consumers equally great. At the start of the year, Brexit was obviously earmarked as one of the big issues facing the industry but as I write, we still await an outcome on what the future holds. Further uncertainty has resulted from the capacity market ruling, which has plunged contract holders, large and small, along with suppliers, into a damaging limbo, with long-term investments and plans up in the air following the sudden withdrawal of £1 billion of contractually expected revenue. While the market was not perfect – indeed the five-year review would have hoped to rectify this – the ruling has serious potential conse- quences across a range of issues and technologies from capacity, wholesale costs and the financial stability of pro- viders through to people's livelihoods. The government urgently needs to reinstate the payments and scheme in some form. If we're sitting here in 12 months awaiting action, then we'll be in a real quandary. This year has also seen confirma- tion of the forthcoming price cap. We've warned for some time that, combined with steeply rising whole- sale costs and a highly competitive market, this would lead to a very chal- lenging time for suppliers. The situa- tion with feed-in tariffs and Renewa- bles Obligation payments has acted as a canary on the financial struggles some are facing, and mutualisation presents a potential extra burden for other suppliers. Sadly, as this year has seen a number of supply businesses fall by the wayside, those warnings are proving valid. The onus must now be on Ofgem to act swily to ensure companies in the market are properly equipped to cope with the demands of being a competitive, customer-focused supplier in a persistently tough cli- mate. And as we've seen recently, the very climate that can push consolida- tion can also make it challenging. It remains to be seen if competi- tion, engagement and switching con- tinue flourishing in a post-price cap world. The cap will inevitably have to rise in the New Year to reflect rising costs so there will be continuing focus on how else to keep bills down, and I hope that we will see progress in how we view energy efficiency programmes and how consumers are charged for their energy. Despite challenges that will continue throughout 2019, we should also remember that this is a resilient, innovative industry and focus on the positives. The National Audit Office smart meter report underlined all the challenges that this complex but critical programme has faced but with SMETS2 meters now being installed, we can look forward to a real step up next year. The Climate Change Act anniver- sary reminded us of the power sector's extraordinary transformation and consequent contribution to reducing emissions. We will keep pushing the govern- ment to facilitate real progress in all those areas crucial to our continuing decarbonisation efforts. And I'm par- ticularly looking forward to seeing the results from two of Energy UK's major undertakings – our Future of Energy project and the report from our Com- mission for Customers in Vulnerable Circumstances. "May you live in interesting times" may be a double-edged proverb but it's a fair summary for the industry right now. Opinion Lawrence Slade Chief executive, Energy UK how they intended to address the shortcom- ings identified in their handling of the freeze- thaw incident, and if found some wanting. By September all the water companies had submitted their business plans for PR19, and collectively they put forward proposals to invest £50 billion in 2020-25. Now Ofwat is studying the nitty gritty of the documents, which stretch to around 5,000 pages. And if the weather and business plans wasn't enough, Labour continued to blow the horn for renationalisation. It's been quite a year for the sector and for Rachel Fletcher, Ofwat's new chief executive who took up the post in January. Next year will be busy too. On 31 January Ofwat pub- lishes its initial assessment of the business plans. Then it will be all systems go. Again. With the lessons learnt from this year, water companies will be hoping to weather the storm in 2019. Water retail The competitive market is bedding down. Lois Vallely The most recent big development is that Chris Scoggins, who headed MOSL (Market Operator Services Limited), is "no longer the CEO". He le suddenly aer just six months in post. He has been temporarily succeeded by Des Burke – a man who knows how to build a "strong culture of continuous improvement". Switching has seen a slowdown in recent months. October saw a mere 8,397 supply point switches. This decrease, however, fol- lowed three months of high activity driven by large multi-site switches. The total num- ber of switches since the market opened now stands at 184,017, representing 6.9 per cent of the total 2,672,477. There are varying opin- ions on whether this constitutes success. Meanwhile, the market operator contin- ues to try and find a solution to the prob- lem of the current "bilateral arrangements" when it comes to interaction between retail- ers and wholesalers in the market. There is no standardised method by which retailers and wholesalers communicate, which adds complexity for retailers. In the summer, CCWater published its customer complaints league table for water retailers. It revealed complaints it had received about retailers were up a whopping 237 per cent on the year and warned that retailers must "get their act together". Next year we are likely to see a lot more activity in the market as new entry continues and more companies consolidate. Make sure you subscribe to Water.Retail, and keep your eyes peeled for big developments. continued from previous page Looking at the year and now

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