Utility Week

The Month in Review Brearley Pinchbeck 6 | JANUARY 2023 | UTILITY WEEK "We're moving away from a world where you just get dumb access to push or pull what you need from the grid." Jo-Jo Hubbard, chief executive and co-founder, Electron. See interview, p14 The Month in Review D riving down water demand and encouraging innovation will be central to the next price review, with Ofwat ring-fencing a total of £400 million for water efficiency and extending the innova- tion competition. The regulator released its final methodol- ogy for its 2025-30 price review in December, setting out expectations for water companies around improving environmental steward- ship to be more resilient to the ravages of climate change. The methodology includes a shi towards outcomes-focused incentives for performance commitments, which Ofwat said would cover key areas such as river and bathing water quality, biodiversity and operational emissions. The number of commitments will be streamlined and have "meaningful" financial outcome delivery incentives (ODIs) attached to each. The regulator highlighted the need for greater ambition on reducing the risk of harm from combined sewer overflows (CSOs) and driving down leakage to meet the growing expectations of customers and stakeholders. It set a provisional allowed return on capital at 3.29%, higher than the current rate, to reflect change to interest rates. Ofwat said the early figure provides a number to be attached to company plans and illustrates Ofwat says PR24 will demand 'transformation' Kaluza in investment talks Ovo Group's smart energy platform Kaluza is talking to "a number of parties" about possible investment opportunities, Utility Week understands. The platform, which launched in 2019, has onboarded most of the five million customers served by Ovo and expanded interna- tionally but has yet to win a re-platforming contract from another UK supplier. The company operates with a separate manage- ment team to Ovo, which was recently rumoured to be bidding for Bulb despite having warned this summer that it faced breaching its banking covenants because of soaring power prices. While declining to elabo- rate on the scale of possible investment, a spokesperson for Kaluza told Utility Week: "We are currently field- ing investor interest from a number of parties and are excited about what those opportunities could further unlock for the business." Kaluza, which posted a £5.6 million turnover for 2021, was launched by Ovo following a strategic £200 million investment from the Mitsubishi Corporation, which saw the Japanese firm acquire a 20% stake in Ovo. As well as being a cus- tomer platform for energy retailers, Kaluza is designed to manage both so ware and hardware to support the integration of electric vehicles and dynamic bat- tery storage on to the grid. the application of its methodology, but stressed it may alter "if the recent levels of market volatility persist". The regulator has set out a £100 million fund to stimulate novel approaches to cut- ting water demand and boosting efficiency together with expectations to set and deliver "aggressive reductions" in leakage against the backdrop of the long-term resilience challenge. The innovation fund introduced at PR19 will be extended to AMP8 with additional resources attached: at least £300 million to stimulate "sector-changing ideas". Chief executive David Black said compa- nies had so far fallen short of expectations and needed to "seize the opportunity to transform their performance at PR24". He added: "The sector needs to act now – in advance of PR24. Significant improve- ments are needed to drive down water demand, improve customer service and reduce pollution incidents. We are looking to companies to respond to urgent need for change and set out ambitious plans to improve outcomes for customers and the environment." Commitments, Black said, should be made by all companies to address risks to waterways from storm overflows to match the most ambitious pledges by the sector. The PR24 methodology reflects much of the dra version published in July with envi- ronmental commitments on CSOs, improv- ing biodiversity, better bathing water quality and cutting emissions. Improving customer services and listening to billpayers will be encouraged via two public meetings hosted by each company next year to discuss plans with their stakeholders. Companies will be incentivised to main- tain and improve asset health, and Ofwat will drive a greater focus on asset steward- ship for the long term alongside action in the price review. There will be separate stretching perfor- mance commitments for cutting leakage and promoting water efficiency to both residen- tial and business customers. Ruth Williams, water correspondent Tough targets for leakage and water efficiency

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