Utility Week

6 | OCTOBER 2021 | UTILITY WEEK The Month in Review "The volatility is high. The nervousness is great. We have been pricing the gas markets for 27 years… and there has been nothing compared to this rally." Tom Marzec-Manser, lead analyst for European LNG and natural gas at ICIS, on the fluctuations in wholesale power prices. Thames' £600m resilience spend provisionally approved Thames Water has been given the green light for infrastruc- ture improvements to boost resilience, with its sharehold- ers set to fund half of the £600 million investment and the rest charged to bills. Ofwat offered provisional backing to the spending to upgrade of hundreds of kilo- metres of water mains and distribution pipes beginning in 2022. There will also be invest- ment in work to stop spikes in pressure within the pipes that can increase the risk of bursts as part of the company's resil- ience work. Ofwat's PR19 final deter- mination recognised the need for additional investment to increase resilience in London during 2025-25. It permitted Thames additional spend- ing beyond the £10.7 billion in its business plan, subject to regulatory approval and a non-specified shareholder contribution. The investment has been approved by the regulator through a gated governance structure. Having passed the first gate, plans are now being drawn up ahead of gate two later this year, which will map out which parts of Lon- don's vast pipe network will benefit from the funding based on risk and previous issues with bursts or leaks. The scheme will be subject to a further three stages of scru- tiny, including consumer pro- tection to ensure efficiency throughout the project. 'We need to look at why suppliers are loss-making,' says Energy UK chief T he crisis sparked by soaring gas prices has exposed "real vulner- abilities" in the UK retail market and sound suppliers are threatened with collapse, Energy UK's chief executive has warned. Emma Pinchbeck told the Business, Energy and Industrial Strategy (BEIS) select committee that she is "con- vinced" the current market turmoil is "not one of the industry's making" but has been caused by a combination of international price shocks and the way the market is designed. She said: "The crisis has exposed real vulnerabilities in the UK's retail sector. There are features of the market's design that make it very hard for suppliers to adapt to the current market situation. "We have companies that are very well run and hedged that are worried, the retail sector makes negative mar- gins, which means that at time of price shocks they have nowhere to go. "We need to look at why suppliers are loss making when they are doing the right thing," Pinchbeck said, add- ing that well run companies are being affected by the explosion of gas prices. "This is not to do with badly run businesses," she said. She told MPs that for individual retailers it is "difficult to hedge against something this significant" and that the methodology of the price cap does not provide them with enough flexibility. Ofgem chief executive Jonathan Brearley said at the same session that the regulator had seen some "unprec- edented changes" over the past few months and that he expected to see more energy supply failures. Adam Scorer, chief executive of National Energy Action, said there was a strong correlation between households receiving universal credit and using prepayment meters, a high proportion of whom are in debt on their energy bills. "The universal credit upliœ surely has to stay for longer," he said, refer- ring to the government's plans to withdraw the temporary £20 increase in the benefit. As Utility Week went to press, sup- pliers serving more than 1.5 million customers had exited the market in September. The biggest of these was Avro Energy, which supplied 580,000 homes. David Blackman, policy correspondent See launch of Energy Reset overleaf and analysis on p28-29 Brearley Pinchbeck

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