Utility Week

UTILITY WEEK | 7TH - 13TH JUNE 2019 | 11 Policy & Regulation This week Ofgem consults on future of price cap Regulator to assess whether current market conditions are facilitating 'effective competition' Ofgem has launched a consulta- tion on its proposed framework for assessing whether market conditions facilitate "effective competition", so it can make a recommendation on the future of the price cap. The regulator says that in the context of the review, it consid- ers competition to be effective if it involves "rigorous rivalry between firms to win and to retain customers, and it results in good outcomes for most consumers in terms of what matters to them (for example, price and quality of service)". Based on that definition, Ofgem identifies three broad conditions for effective competition: structural changes in the market should be developing well, including reforms from the government and Ofgem as well as wider market developments; there should be no unaddressed anti-competitive conduct nor unnecessary barriers to consumers and market providers in the market; and com- petition should deliver good outcomes for most consum- ers, including for those who are less active in the market. Those who wish to share their views on the frame- work have until 12.30pm on 9 July 2019 to do so. The cap is a controversial measure. It was introduced on 1 January and increased by £117 to £1,254 on 1 April. The level will be reviewed again later in the year. Ofgem argues it protects about 11 million so-called vulnerable customers from being penalised by their suppliers for being loyal, but a number of big six energy suppliers have blamed the introduction of the cap for poor financial results and customer losses. AJ ELECTRICITY Renewables to enter capacity market The government has confirmed its intention to allow intermit- tent renewables to compete alongside dispatchable technolo- gies in the capacity market. Responding to a consultation on technical amendments to the scheme, the Department for Business, Energy & Industrial Strategy said allowing renew- able projects to pre-qualify for the three-year-ahead auction now scheduled for January is "fair and necessary". Although most respondents supported the proposals, some stakeholders argued that allow- ing non-dispatchable technolo- gies into the capacity market is counterintuitive and at odds with the goal of the scheme. WATER Incumbents 'must support markets' Ofwat's chief executive Rachel Fletcher has challenged incumbent companies operating wholly or mainly in England to do more to support the develop- ment of markets. In an open letter, Fletcher said the overall level of incum- bent water company support for markets is "unacceptable". "We see numerous, persistent examples of incumbent water companies failing to support the development of effective markets – in particular the markets for business retail and developer services." Fletcher said Ofwat expects to see a "significant improve- ment" over the coming months and that in some cases incum- bent water companies are giving "insufficient thought" to the potential impact their actions (or inaction) can have on the effec- tive functioning of markets for customers. ENERGY Government plans to extend RHI deadline The government has announced plans to delay the date by which projects will have to be com- missioned to receive a tariff guarantee under the Renewable Heat Incentive (RHI) scheme. The deadline, which was pre- viously set for 31 January 2020, will be postponed by a year to 31 January 2021. In a letter to stakeholders, the Department for Business, Energy & Industrial Strategy said the government would bring for- ward legislation later this year to enact the extension. It said projects that have already been awarded a tariff guarantee will be able to reapply so they can be commissioned at a later date. The announcement was welcomed by both the Renew- able Energy Association and the Energy Networks Association. Ofgem: market should deliver good outcomes Political Agenda David Blackman "Placing a flag in the net-zero sand could be May's legacy" The number of candidates for the race to become Conserva- tive party leader continued to fluctuate this week in the run-up to 7 June, when Theresa May will formally step down as prime minister and the process to find her replacement kicks off. James Cleverly, the little- known deputy chairman of the Tories, became the first candidate to drop out of the race earlier this week. However, such luminaries as Mark Harper, whose biggest claim to fame is ing renewable generation to be included in the capacity market. But a big issue still to be resolved is whether to endorse the Committee on Climate Change's recommendation that the UK should adopt a target of net-zero emissions by 2050. May has little to show for the nearly three years she has been PM. Planting the UK's flag in the net-zero sand would provide some legacy beyond being a footnote in the Brexit debate. See interview, p10. having to resign as immigration minister a§er it came to light that his cleaner lacked permission to work in the UK, remained in the contest as UW went to press. Given the uncertain nature of the leadership contest, the temp- tation could be for civil servants and ministers to down tools for the next couple of months. The advent of a new prime minister could be the cue for a change of tack on energy and climate change policy. Work at the Department for Business, Energy and Industrial Strategy continues with a num- ber of low level but nevertheless important announcements over the past week, such as allow-

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