UTILITY WEEK | MAY 2021 |
5
KNOWLEDGE WORTH KEEPING
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Not so silly season
A
ugust is traditionally known to the media as the "silly season", when a
dearth of signi cant news makes room for stories about skateboarding
otters and the like.
No such fun in the utilities industry this summer. Instead, we were hit with
a range of major developments in both energy and water. We heard Macquarie
wants to plough money into beleaguered Southern Water (p13) and reviewed
with limited enthusiasm the release of Defra's dra„ strategic policy statement for
Ofwat (p16).
Meanwhile, in energy the summer saw publication of dra„ business plans
for ED2 and an initial CMA position on RIIO2 appeals. Furthermore, despite the
parliamentary recess, a Πurry of policy papers were released, including but not
limited to the government's energy retail market strategy for the 2020s (p22), an
action plan for energy system digitalisation and a UK hydrogen strategy (check
Utility Week's website for the latest industry response and analysis).
This gamut of news sets the tone for an intense nal quarter to 2021 in which
we can expect further weighty developments and announcements that will Πesh
out future objectives and expectations for essential service providers. Here are a
few to look out for in the autumn:
1. Heat and Buildings Strategy. This critical policy paper has been on the brink
of publication for an age. Reportedly it's release has been held up by tit for tat
between Number 10 and Treasury over the costs and disruption associated with
boiler replacement, an area of controversy neatly avoided in the hydrogen strat-
egy by avoiding any clear position on its use for domestic heating.
2. Treasury Net Zero Review. This publication has the ambitious purpose of
clarifying decarbonisation costs and how these will be distributed across society.
The upcoming government spending review will make this even more of a politi-
cal hot potato given the way Covid has ravaged the economy. Nevertheless, the
review must come out before COP26 in November.
3. Final determinations on RIIO2 CMA appeals. The CMA's provisional position
le„ us with a one-all draw between the gas and transmission network appellants
and Ofgem. It seems the former will have to accept Ofgem's unpopular cost of
equity. But equally, the CMA looks minded to force Ofgem to back pedal on its
outperformance wedge. The nal determinations are keenly anticipated by those
with skin in the game. But DNOs will also pore over the decision-making process
to try and bomb-proof their nal business plans, due in December.
4. Ofwat's PR24 consultation response. Passionately argued submissions have
poured in for the water regulator's consultation on the shape of the next price
review, including a Water UK plea on behalf of the industry for a "reasonable
Wacc" and a call from MOSL for ODIs targeted at the non-domestic market.
Ofwat's response will set the tone for industry-regulator relations over the rest of
the current AMP.
Jane Gray, editor, janegray@fav-house.com
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Vision:
21st-century mobilisation
https://bit.ly/3iV4FD3
Oracle
UK Energy Consumer Report:
Are UK energy providers ready to
serve Generation Z?
https://bit.ly/3yVD9eh
YTS:
Open banking: The blue-sky
opportunity for utility companies
https://bit.ly/3hTAZFW
Letter from the Editor
Jane Gray
