Utility Week

8 | 20TH - 26TH MARCH 2020 | UTILITY WEEK Policy & Regulation This week RIIO2 to include big net-zero reopeners Price control reviews will be reopened to take account of evolving decarbonisation policy Ofgem chairman Martin Cave has said the regulator is "wrestling" with how to address net-zero commitments in the price control process. Speaking at Utility Week's Investor Summit, Cave said business plans for the next five years had to address the challenge of decarbonisation by 2050 but also be flexible enough to adapt to evolving policy, innovation and societal change. The price review process will therefore have to include "substantial net-zero reopeners", he said. He also pointed to the difficulties of the individual targets of cities or regions aiming to hit net-zero emissions before 2050. "We anticipate this price control will include very substantial net-zero reopeners, which will enable us, as policy becomes clear and as the process of evidence of take-up is revealed, to make investments in a calculated way," he said. However, Northern Powergrid chief executive Phil Jones warned against reopening price reviews, saying it could affect investor perception of potential risk factors. Cave said who pays for decarbonisation – the customer or the taxpayer – remains a big issue. A further concern is whether decarbonisation strategy should be set at national or regional level. "How do we react to those democratically elected mayors who have chosen to achieve more aggressive decarbonisation targets than the government?" he said. "That is something we are still wrestling with and is something the networks are also having to get to grips with." JW ENERGY Northern Irish RHI scheme a high-risk project too far Northern Ireland's devolved administration overreached itself when it launched its version of the Renewable Heat Incentive (RHI) scheme, according to a damning report into the "cash for ash" scandal. The report, which runs to 656 pages, outlines the findings of the long-running inquiry into the failure of the Northern Ireland non-domestic RHI, which triggered the collapse of the Stormont power sharing executive in January 2017. It offers 44 recommendations based on 319 critical findings. Set up in November 2012, the RHI was suspended in February 2016 ažer overspending to the tune of £700 million. The report concludes that the scheme, which encouraged the use of renewables rather than fossil fuels in heat production, was a "project too far" and its high risk profile meant it should never have been adopted. ENERGY Price cap will have consequences for the vulnerable The introduction of the price cap is making it impossible for major energy suppliers to serve their large numbers of vulnerable customers and remain profitable, according to Chris Thewlis, chief operating officer of Npower. Addressing Utility Week's Consumer Debt Conference, Thewlis said the acquisition of Npower by Eon and the resulting 4,500 redundancies were "directly related to a price cap intervention that had these unintended consequences that will ultimately impact those most vulnerable, without some sort of modification". Thewlis said about 40 per cent of Npower's customer base is now defined as having some sort of vulnerability compared with 15 per cent ten years ago. He argued that the price cap has also brought the price down for those who didn't necessarily need it. "It's taken nearly £1 billion out of the pockets of the big six this year," he said. "So it's pretty much made every single big six supplier unprofitable. And if no one's making any money, the services that are being provided will start to be reduced naturally because of cost pressures." Thewlis cited analysis by Bfy Consulting showing customers with a vulnerable indicator are £21 a year more expensive to serve. In 2019 Eon had had 1.5 million contacts from customers with a vulnerability. "One in three customers are in debt struggling to pay, and one in six have multiple vulnerabilities." Who will be picking up the decarbonisation tab? The trade body representing the water sector has criticised the Environment Bill for failure of ambition by not trying to persuade and assist the public to be more water-efficient. Water UK said the bill lacks clarity on key issues relating to water and wastewater, and demonstrated a "weak approach" to integrated long- term planning for drainage and wastewater. The criticism comes in the wake of shadow environment Water UK slams Environment Bill for lack of ambition minister Luke Pollard, speaking as part of our Mind the Tap campaign, castigating the bill as a "wasted opportunity" because of its lack of focus on water. Water UK believes the bill is too ambiguous in its clauses on resource efficiency. In December, Water UK published a report on reducing per capita consumption of water. The study, carried out by Artesia, found conclusively that water labelling schemes are "by an order of magnitude, the most powerful, reliable, cost-effective and consumer-friendly options available" for reducing water demand in the home. It also concluded that such a scheme could be introduced at little cost to government. "These changes would also protect consumers' water bills and give them information about the appliances they purchase," the body said. It called on the government to commit to a labelling scheme for appliances, coupled with minimum evidence-based standards for water-efficient use. The trade body stressed that "the water industry is uniquely affected by climate change's impacts on rainfall patterns and drought". It has drawn up a list of 24 recommendations to improve the bill. It also wants the proposed Office of Environmental Protection to be given guaranteed powers to hold government to account. See Mind the Tap, p6 WATER

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