Utility Week

8 | JANUARY 2021 | UTILITY WEEK The top stories… Energy Energy Water What has happened? Aer a two-year wait the energy sector finally got sight of its white paper in December. The blueprint arrived with little fanfare, coming at the tail-end of a succession of decarboni- sation announcements (see p14-17). When it came there was little in the way of new detail; most of the announcements having already featured in Boris Johnson's 10-point plan. Expected clarity on the funding of nuclear plants or the further separation of the Elec- tricity System Operator from National Grid were instead replaced with promises of fur- ther consultation. However, there were clear commitments in some key areas for utilities, including a pledge to overhaul the existing energy National Policy Statements (NPS) What has happened? Since Pennon Group sold its waste manage- ment business Viridor in the summer, specu- lation around how it will spend its war chest has been rife. Last month there were sugges- tions – not explicitly denied by the company – that Southern Water could be a target. The parent company of South West Water is also understood to have run the slide rule over Northumbrian, Wessex and Bristol before set- ting its sights on Southern. It comes aer a turbulent few years for Southern, which has underperformed on customer service and struggled to get pollu- tion incidents under control. The high-profile What has happened The regulator issued its final determinations on the business plans of gas and transmis- sion networks at the start of last month (December). The details are set out on p18- 19 but include an increase in the cost of capital, more detail on how net zero reopen- ers will work and a significant shi on totex allowances. Reaction from the companies had been fairly muted as Utility Week went to press, in contrast to the immediate opprobrium unleashed aer the dra determinations in July. What they said Colm Gibson, managing director, Berkeley Research Group: "Price controls tend to either look like they've been designed by economists or designed by civil servants and this one looks very much like it's been designed by civil servants." Jonathan Brearley, chief executive, Ofgem: "We talked openly with the CEOs of the network companies around what we would do if we do end up at the Competi- tion and Markets Authority [CMA]. Ofgem's intention is to work collaboratively and con- structively with them to keep getting that investment in place and to treat this exactly as it is – a referral to the umpire – and con- tinue to focus on delivering net zero. There is simply too much to be lost if we end up with this getting in the way of the bigger task of supporting that transition." What this means Initial reaction from industry observers varied between those who thought Ofgem had managed to strike a successful balance between encouraging investment towards a decarbonised energy system and still crack- ing down on returns, to those who viewed The Energy White Paper finally arrives Ofgem has its final say on price controls New nuclear: further consultation promised but no clarity on how new projects will be funded Southern Water: any acquisition would need approval from the Competition and Markets Authority Pennon linked with move for Southern Water

• Cover