Utility Week

The Month in Review UTILITY WEEK | FEBRUARY 2023 | 7 Ofgem moving 'way too fast' on financial resilience Octopus Energy's regulation director has slammed Ofgem proposals to introduce mini- mum capital requirements for energy retailers, accusing the regulator of failing to properly assess the impact on the market. Rachel Fletcher was speaking to Utility Week following the statutory consultation on measures to improve financial resilience published last November. In the document, Ofgem axed plans to require all suppliers to ring-fence their customers' credit balances and proposed the introduction of a minimum capital requirement for all domestic suppliers. The capital adequacy requirement would be brought in over a number of years in recognition that the sector is currently under-capitalised and operating in a volatile economic environment. Fletcher, who previously worked for the regulator for more than a decade, told Utility Week that Octopus had major concerns about Ofgem's plans. She said: "We think Ofgem is moving way too fast in what is a very important area of policy making. They've swung the bat so fast that they've missed the ball. "The direction of travel towards some kind of prudential regime is one that we would support, and has got more credibility than requiring all suppliers to ring-fence credit balances. "But the capital adequacy proposals that Ofgem has put on the table so far are not ready for implementation. We are not confident that they're appropriate, or effective." Fletcher highlighted the inadequate levels of hedging amongst the suppliers who failed in 2021 and said Ofgem's proposals "don't give any confidence that this issue will be nipped in the bud", adding that Ofgem had "not properly assessed the cost of the proposals to customers or their impact on competition". She added: "They are very, very unclear on exactly how Ofgem is going assess whether com- panies have or have not met their requirements. It's not good for customers – and why we are wor- ried about the effectiveness of the proposals." Responding to the comments, an Ofgem spokesperson said: "Our proposal to introduce a capital adequacy requirement effectively pro- tects consumer interest in the long term, through ensuring suppliers operate with enough of a reserve to weather shocks. "While there have been mixed reactions from stakeholders and these are difficult decisions, we are confident these measures will bring overall benefit to the industry, to ensure greater supplier resilience in a timely manner, and pre- vent further exits from the market on the scale we have seen last year." Southern Water installs network of sewer monitors Southern Water has added 22,000 moni- tors across its wastewater network as part of a "revolutionary" project to cut pollu- tion incidents by 2025. The company has installed monitors to detect when blockages or faults are devel- oping to allow teams to respond quickly before a flooding or pollution incident occurs. The sensors, together with an artificial intelligence system, target unflushables from homes and businesses including wetwipes, fats, oils and grease, and other items that should not enter the sewer net- work. These contribute to more than 80% of blockages in Southern's network, there- fore locating and removing them would be "a real game-changer", according to head of wastewater networks Alex Saunders. "The revolutionary technology will mean we can respond proactively instead of waiting for sewers to block," Saunders said, explaining that blockages can be detected and found within hours rather than the several days it would have taken previously. Southern is investing £15 million in the monitors, which are part of the company's work to drive down pollution incidents by 40% by the end of 2025. The Month in Review Utility Week rounds up the latest senior appointments and departures across the sector. National Grid Phil Swi is to step down as president of National Grid Electricity Distribution at the end of March a'er more than 30 years working for the distribution network operator. He will be replaced by Cordi O'Hara, the current president of National Grid's non-reg- ulated business arm National Grid Ventures, who will take up the role on the first day of the RIIO-ED2 price controls on 1 April. Ben Wilson, chief strategy and external affairs officer for National Grid, will replace Cordi O'Hara as president of National Grid Ventures on an interim basis while also retain- ing his current group executive role. National Grid also announced the appoint- ment of Carl Trowell to lead a new business unit tasked with delivering the company's 17 major onshore transmission projects, which Ofgem confirmed in December would be cov- ered by a new Accelerated Strategic Transmis- sion Investment regulatory framework. Shell Centrica has announced the appointment of former Shell group treasurer Russell O'Brien as its new chief financial officer, with incumbent Kate Ringrose step- ping down a'er 20 years at the company. O'Brien, who will also become an execu- tive director, will take up the role on 1 March while Ringrose will step down as CFO and executive director on 28 February. She is expected to leave the business towards the end of the year. At Shell O'Brien held a number of senior chief financial officer roles. Ofwat Aileen Armstrong, Ofwat's senior director for company perfor- mance and price controls, has signalled her departure from the water regulator this summer. Armstrong has been instrumental in the PR24 process and will be stepping down months a'er the industry began work on its dra' plans the next price review for 2024. She will join the Solicitors Regulation Authority a'er seven years at the water regulator. Ofwat said recruitment for Arm- strong's role has begun and chief executive David Black insisted PR24 preparations were "robust". ON THE MOVE £6m Amount Drax agreed to pay into Ofgem's redress fund after admitting "inadvertently" submitting excessive bids to turn down generation at its pumped storage station in Scotland. £5.5bn Funds allocated to help businesses with their energy bills between March 2023 and March 2024, compared to the £18 billion allocated for the same purpose over winter 2022/23.

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