Utility Week

14 | 19TH - 25TH JULY 2019 | UTILITY WEEK Policy & Regulation This week Successor to price cap a priority for Ofgem Energy regulator says it must prove itself capable of delivering major changes in energy system Ofgem has listed creating a successor to the default tariff price cap as a key priority in its strategic narrative report. The energy regulator says it must prove itself to be an organisation "capable of deliver- ing major changes to the energy system" by 2023. Ofgem listed three core areas of importance in the framework: l Enable competition and innovation to drive down prices and create new products and services. l Protect consumers, especially the vulnerable, stamp- ing out sharp practice and ensuring fair treatment. l Decarbonise to deliver a net zero economy at the low- est costs to consumers. Ofgem concedes that the domestic energy retail market "is not working well" for many consumers, with competition causing less engaged customers to "pay for their inertia". In creating a net zero economy the regulator wants to take a whole systems approach and "break down the existing silos across the energy value chain". "This will facilitate more competition and create new business opportunities that benefit consumers. We will consider the environmental impacts of all our ongoing regulatory decisions. We will continue to focus on ensur- ing security of supply for Great Britain's energy system. We will also update our guidance on sustainability, to better inform our decision-making processes, particu- larly in the light of government's ambition of net zero emissions by 2050", it said. AJ WATER Ofwat told to set out its ombudsman plan Ofwat has come under pressure from MPs to flesh out its plans for an independent ombudsman. They have also urged Ofgem to update them on its plans to fund the decarbonisation of the energy system. The House of Commons' pub- lic accounts committee has stud- ied the work of the four main consumer protection watchdogs – the Financial Service Author- ity, Ofcom, Ofgem and Ofwat. The report concludes that consumers are being "penal- ised" for loyalty and identifies the regulators' traditional reli- ance on promoting competition as a "huge part of the problem". "Regulators need to work bet- ter together to ensure that com- petition leads to better services and more choice for consumers, rather than presenting opportu- nities for them to be exploited by suppliers." ENERGY Targets for capacity market confirmed Interim energy and clean growth minister Chris Skidmore has confirmed the procurement targets for the capacity market auctions scheduled for 2020. They include the replace- ment for the four-year-ahead (T-4) auction for delivery starting in 2022/23 which was due to take place in February but was cancelled ašer the scheme was suspended. Skidmore has set the pro- curement target for the now three-year-ahead (T-3) auction at 44.2GW. He agreed with the electricity system operator's (ESO) recommended target volume of 45.4GW but opted to set aside 1.2GW to be acquired in future auctions. He also agreed with the ESO's recommended target volume of 44.7GW for the 2023/24 delivery year. He again decided to set aside 1.2GW. WATER Water firms must be financially resilent Ofwat has set out proposals to restrict water companies from making payouts to shareholders if their credit rating is at risk. The regulator's sugges- tions include a common set of standards to strengthen water companies' financial resilience. For example, "cash lock-up" conditions bar a water com- pany at risk of losing its invest- ment grade rating from making payouts to shareholders or removing money or assets from the business. Ofwat said the changes were intended to safeguard cus- tomers' interests by ensuring companies remain financially robust and continue to attract investment. The domestic market is 'not working well' for all Political Agenda David Blackman "Next week could see a big turnover in ministerial jobs" It's been a time for swansongs at Westminster this week. Most notably, Theresa May was due to field her last prime minister's questions ašer Utility Week went to press. Ditto Greg Clark who took what is widely expected to be his final grilling in the House of Commons as Secretary of State for Business, Energy and Indus- trial Strategy on Tuesday. The Tunbridge Wells MP is reckoned to have very little chance of holding his seat in the next fortnight. It may not even survive in its current form. Liz Truss, currently chief sec- retary to the Treasury, is tipped to take the top job at the busi- ness department if she fails to land her dream job as chancellor. The former accountant has marked herself out as the keeper of the Thatcherite flame in government so can be expected to have little interest in Clark's industrial strategy. Once again, it could be all change for energy policy at Westminster. Cabinet if runaway Tory leader- ship frontrunner Boris Johnson enters Number 10, given his very public opposition to a no-deal Brexit in recent months. And Claire Perry, currently on leave from her post as minister of state for energy on compas- sionate grounds, has been tipped for the chop too, even though she has been less vocal in public about the perils of leaving the EU without a deal. So next week could see a big turnover in ministerial jobs, given that Johnson could have a lot of political favours to repay. What is in little doubt is that the BEIS department is likely to experience big changes over the

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