Utility Week

UTILITY WEEK | MARCH 2021 | 9 …and what they mean What they said Fletcher: "It has been a great privilege to be Ofwat's chief executive over the past three years. I am proud of the partnerships the team has built and the progress we've made towards unlocking the full value the water industry can provide for customers, society and the environment. Black: "There are profound challenges for the water sector – but some real opportuni- ties too to show how water companies can improve customers' lives, especially in these difficult times. I am looking forward to press- ing ahead with delivering our strategy and guiding Ofwat and the sector to help deliver more for customers and the environment." What this means While there is never a good time for uncer- tainty at a regulator, Fletcher has chosen to leave at perhaps the most opportune point in a regulatory cycle, with the PR24 process at a relatively early stage. There will be reassurance that Black is in place as interim chief. His role at the helm of PR19 should mean there is little disruption in planning for the next price review. He is widely tipped as the leading internal candi- date for the permanent role but we review the potential external candidates on p25. For Octopus, this marks an ambition to be considered more than a disruptor and under- lines the desire not to derail its rapid pro- gress through regulatory slip-ups. So far, the retailer has managed to achieve significant scale with its reputation intact. Chief execu- tive Greg Jackson will be desperate to ensure this work is not undermined by a glitch that leads to the kind of fine from Ofgem, which has embarrassed some of Octopus' rivals. What to look out for The situation at Ofwat is complicated by the fact that chair Jonson Cox is also due to step down this year, having already extended his tenure once. Will Ofwat wait until a new chair is in place to start the appointments process, or will Cox be asked to defer his departure? If his term was stretched to Octo- ber 2022 it would bring stability but would also mean he had held the role for a decade. Of course, the shadow of the CMA appeal looms over Ofwat. It is due to deliver its final verdict as Utility Week goes to press. Several updates since the dra• findings have shi•ed it closer to Ofwat's position but there is still the potential the regulator could appeal the CMA's findings if it feels they undermine the price control process. This could add an extra element of urgency to resolve the issue of Fletcher's replacement. business" within Whitehall, so it seems likely that it will chime in with Ofgem's headline message. However, many questions remain, not least whether the system opera- tions for gas should also be separated. This adds a layer of complexity, but the rationale of having an integrated system operator with an overview across the energy mix is clear. As Catherine Mitchell of the University of Exeter points out, if the decision is not taken now, it is likely to drag on in the same way the 2019 decision has. The question feeds into wider discussions around whether a separate delivery body is needed to coordi- nate the net zero journey and who would be best placed to take on this role. Candidates in the form of existing bodies could include the Committee on Climate Change or the National Infrastructure Commission. ing relationships with installers, auditors and established consumer bodies in the zero carbon home retrofitting market. What they said Ann Barradine, director, Insulated Homes: "The installers who believed in this scheme invested time, money and the belief this scheme would make a difference to our com- panies' profitability and workflow, now find themselves on the brink of liquidation as a direct result of the atrocious lack of adminis- tration, organisation, coordination and infor- mation provided by BEIS and TrustMark." Ed Miliband, shadow business secretary (commenting on the underspend): "This makes a mockery of the government's com- mitments on climate change and a green recovery." What this means It is clear that decarbonisation of heat will be one of the most complex and challenging strands of the net zero push and there is no time to waste. But ambitions of hooking up 600,000 homes a year with heat pumps are meaningless if the fabrics of homes are not attended to first. The "snail's pace" of the GHG will undoubtedly act as a drag on the wider decarbonisation push if it is not fixed. There is also the issue of public percep- tion. When GHG was first announced there were warnings that it must avoid the pitfalls of the unloved Green Deal programme. Yet this is exactly what has happened. There is a danger that consumers frustrated by the slow pace and convolutedness of this scheme may lose faith in wider decarbonisation efforts. Given the changes we will be asking the pub- lic to make over the next decade, this lack of trust has to be avoided at all costs. What to look out for The government has become fairly accus- tomed to U-turns over the past year so it would be entirely unsurprising if it back- tracked on the overspend. However, this will only solve one part of the puzzle. Given broader disquiet about the results achieved through outsourcing national programmes, could the government be forced to look again at the administration of the scheme? Many commentators would like to see more local autonomy, with lighttouch oversight. With COP26 around the corner and the need to push forward a green plan, the gov- ernment needs to make a public show of fix- ing this scheme before it loses all credibility. ESO is already legally separated from National Grid What to look out for The Energy White Paper included a com- mitment to consult on system operation governance arrangements in 2021. It seems likely that the principle of a full separa- tion will receive broad support in a preced- ing consultation so this may be one of the few areas where we get definitive policy direction from government this year. But, of course, the actual process of separation and the finer details of what an independ- ent system operator looks like will take some time to develop. There is also the question of what this means for National Grid. Would this unshackle the company to explore acquisi- tion targets that could otherwise raise dif- ficult questions about conflicts of interest? See analysis p20-23

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