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UTILITY WEEK | NOVEMBER 2020 | 9 …and what they mean concern is that if the allowed returns are too high that's just a transfer from customers to investors." Richard Emmott, director of corporate affairs, Yorkshire Water, said: "We welcome the fact that the CMA has taken a clear view on the need for long-term investment in resilience. The recognition that long-term investment is important and the shi from opex to capex is really significant for us, but that doesn't change the fact that the settlement remains a tough one that we have to deliver." What this means For the four appellants – Anglian, Bristol, Northumbrian, and Yorkshire – the stance on Wacc is clearly a prominent victory, how- ever once the package as a whole is taken into consideration along with the cost of mounting the appeal, the picture may not be as positive for them. Ofwat now needs to consider its response to the CMA prior to its final redetermination in December. It is likely to challenge several areas, but having failed to convince the CMA that its approach to Wacc stands up, it's dif- ficult to see that figure changing much. The rest of the water sector must now decide how it reacts, with a push for an interim determination cited as one possible option. Even more intriguing is the impact on Ofgem as it makes its own calculations on the rate of return network companies should be allowed going forward under RIIO2. The energy regulator has previously taken the CMA's pronouncements on rates of return in water as a base for its own figure. What to look out for The responses to the CMA's initial findings will be fascinating and are likely to come from a broad range. Consumer groups were furious that under the watchdog's proposals consumers would see less of a cut in their bills, citing the need for the sector to do eve- rything it can to make bills affordable. Ofwat will set out its case once more but it is Ofgem's comments that are likely to be of most interest. It faces some difficult deci- sions and may need further guidance from government on whether the net zero target means encouraging investment is now of more importance than keeping bills low. See analysis 'CMA rock the boat', p20 due to held in late 2021. An increase in the capacity or frequency of the auctions has long been called for but the devil will be in the detail. What to look out for As Utility Week went to press, the Energy White Paper was still being touted for an October publication. Its contents will be crucial in building the policy framework for the net zero journey. While an explosion in renewable gen- eration is clearly needed, there are still wide-ranging questions about how the UK's energy infrastructure will need to develop to handle this, along with a potentially huge surge in electricity demand over the next few decades. days aer Ofgem revealed the supplier owed £8.7 million in Renewables Obligations and feed-in-tariff (FIT) payments. Ofgem has also responded to evidence of "material changes" in non-payment to sig- nal that the price cap on default tariffs will increase. What they said Dermot Nolan, former Ofgem chief executive: "If I was running an energy retail company, I would approach my strategy on the basis that the price cap isn't going to be removed until 2023." An industry source on Tonik's failure days aer the Renewables Obligations announce- ment: "We see the same thing around this time every year. Is this the definition of a functioning market?" What this means Tonik is unlikely to be the last supplier to exit this year. In previous years many market fail- ures were companies evidently ill-prepared for a complex and risky market in the first place. However, observers pointed out that Tonik had credible backing and appeared to be doing many of the right things. The question is what would happen if one of the larger challengers or even the rem- nants of the big six were to be squeezed out? The supplier of last resort process has proved robust, but how far could it stretch? In the background, the government has dusted off its special administration mechanism for energy suppliers, which could see the state take over the running of a failing supplier (see Review, p6). What to look out for A total of £34 million is owed in the most recent tally of missed Renewables Obliga- tions payments and as most of the compa- nies on the list have already le the market it seems likely a good portion of that will go into mutualisation, heaping more pressure on the industry. The rise in the price cap will be welcomed in many quarters but the whole sector knows that this could be very bad PR. How Ofgem manages the communication will be key. Big ideas: floating wind has been added to already ambitious offshore targets