Utility Week

UTILITY WEEK | 7TH - 13TH JUNE 2019 | 19 This week 'Regulator error' costs customers £24bn Call for customer compensation as Citizens Advice report reveals errors by Ofgem and Ofwat Utility customers have been over- charged by more than £24 billion over the past 15 years due to regulatory errors, research from Citizens Advice has found. The consumer advocate is calling for these customers to be compensated through a rebate on their bills and for the regula- tors to prevent a reccurence. The research follows Citizens Advice's 2017 report, which found energy regulator Ofgem made errors in set- ting price controls for energy networks, resulting in cus- tomers being overcharged £7.5 billion over an eight-year period. Following the report, three network companies returned some money to customers. Yet Citizens Advice has claimed more errors were made by Ofgem over a longer period and by regulators in other markets. The breakdown is £11 billion for energy networks and £13 billion for water providers. The consumer body said in a statement: "These overpayments partly occurred because regulators made forecasting errors. They predicted that costs, such as debt, would be higher than they in fact were. Regulators also overestimated how risky these businesses were for investors." It added that while several energy and water firms have taken steps to return some money to custom- ers, it wants all companies to provide a voluntary rebate, and if they do not, the government should step in. However, the research was criticised by some in the sector. Energy Networks Association CEO David Smith described the figures as "simply wrong", while SSE branded it "flawed". AJ WATER Pennon CEO 'not distracted' by threat of renationalisation Chris Loughlin, chief executive of Pennon Group, has told Utility Week he is focused on running a good business and not getting distracted by "what may or may not happen" with Labour's pro- posals to renationalise the water industry. South West Water's owner revealed a strong set of results "across the board" last week as it published its full-year finan- cial figures for the year ended 31 March 2019. The group's under- lying profit before tax was up 8.3 per cent to £280.2 million, driven by earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 19.1 per cent in its waste business, Viridor. South West Water reported a 1.7 per cent rise in underlying revenue to £581 million, while EBITDA increased by the same amount to £367.1 million. ELECTRICITY Third CfD allocation round kicks off The third competitive contracts for difference allocation round, which will see up to £65 million of annual subsidies awarded to renewable energy projects, opened on 29 May. The auction is expected to show continued reductions in the cost of offshore wind and could even see strike prices fall to subsidy-free levels for the first time. Developers have until 18 June to submit applications, which will be assessed between 19 June and 9 July. The exact timetable from then on depends on whether any projects are disqualified and if any of the developers mount an appeal. ELECTRICITY Transmission link contribution plan Ofgem is considering a pro- posal by Scottish and Southern Electricity Networks (SSEN) for its distribution arm to contribute towards a series of transmission links to Shetland, the Western Isles and Orkney. The subsea cables would allow the islands to produce more renewable energy and export it to the mainland. They would also help the islands, which rely on diesel engines for back-up generation, to keep the lights on once the diesel engines are retired. SSEN has argued for its dis- tribution business to contribute some £250 million towards the 600MW Shetland transmission link. Ofgem said it agreed with the proposals in principle and may be able to approve the con- tribution to the Shetland project. However, the regulator said it is not clear how it could be imple- mented under current licence conditions and industry codes. Energy networks have overcharged by £11 billion Finance & Investment Stock watch 30 28 26 24 SHELL SHARE PRICE, FIVE DAY Oct 2018 Feb 2019 Jun 2019 SHELL SHARE PRICE, ONE YEAR Shell shares dropped almost 2 per cent as trading opened on Tuesday, despite the oil giant promising to return $125 billion to investors between 2021 and 2025. The firm is planning to spend $3 billion annually on new energy projects over the same period as it seeks to become the world's largest power company by the end of the next decade. It said these projects could be expected to generate up to $35 billion in annual revenues by 2025. 28.2 28.0 27.8 27.6 27.4 30 May 31 May 3 Jun 4 Jun euros euros

• Cover