Utility Week

The Month in Review Brearley Pinchbeck 6 | APRIL 2023 | UTILITY WEEK Ofgem will have to socialise PPM premium The government's decision to task Ofgem with ending the prepayment meter (PPM) standing charge premium will mean higher bills for other customers, Citizens Advice has warned. As part of March's Budget, chancellor Jeremy Hunt announced an end to the current arrangements under which customers on prepay- ment meters pay £45 more in standing charges than those on direct debits. The mismatch in standing charge payments will be dealt with via the Energy Price Guar- antee initially, frozen at £2,500 a year for an average house- hold. However, the EPG runs out in just over a year's time. At Energy UK's post-Budget breakfast briefing, Citizens Advice chief energy econo- mist Richard Hall said that removing the standing charge premium would initially be bankrolled by the Exchequer but "given Ofgem doesn't have tax and spend powers, it will inevitably be paid for by other consumers". "For the first time net zero occupies a senior position in the Whitehall cabinet ranking … After the great offices, it is the next one and outranks all other departments." Grant Shapps, secretary of state for energy security and net zero. The Month in Review N orthern Powergrid has lodged an appeal against Ofgem's final deter- mination on its business plan for the RIIO-ED2 price control, beginning on 1 April. The appeal by the electricity distribution network operator (DNO) centres on the way costs have been allocated, with Northern Powergrid claiming that Ofgem's assessment contains "material errors" that will ulti- mately have an adverse effect on its income. It claims the regulator mis-allocated allowances between cost categories. In particular, Northern Powergrid has taken issue with the way costs have been allocated for the uptake of low-carbon technologies such as electric vehicle charging points, heat pumps and batteries. The appeal application says: "[Ofgem] relied on DNOs' submitted cost proportions when allocating DNOs' efficient modelled costs. [Ofgem's] decision to do so was irra- tional and illogical because DNOs' submit- ted costs were based on decarbonisation planning scenarios that were manifestly different from the one that [Ofgem] intended to fund." Northern Powergrid also claims that Ofgem "failed to compare costs on a rational and consistent basis when determining [business plan incentives]". The company says the combined adverse Northern Powergrid appeals ED2 decision EDF and Drax: no coal next winter EDF and Drax have ruled out extending the life of coal units that were kept on standby as part of this win- ter's contingency plans. Both operators ruled out the possibility of their units being used again, just hours a¡er National Grid Electricity System Operator outlined its intention to begin negotia- tions for contract extensions. Uniper, the third operator with a contract for 2022/23, intends to operate commer- cially for winter 2023/24 and therefore would also not be in place to extend its contract. An EDF spokesperson told Utility Week: "There are a number of workforce and operational reasons that mean extending the life of West Burton A again is very challenging. "Retaining suitably quali- fied and local personnel to ensure safe operation was a major challenge last year and, looking forward, becomes untenable as many of the workforce have stayed on well beyond planned retirement dates already." A Drax spokesperson said: "The extension was a complex staffing, logisti- cal an engineering project … With two major maintenance outages planned on our bio- mass units this summer, and a number of certifications expiring on the coal-fired units, the units would not be able to operate compliantly for winter 2023." impact of these errors is £171 million. Utility Week understands the other DNOs have accepted their final determinations. In November 2022, Ofgem approved £22.2 billion of investment by electricity distribu- tion networks over the five-year ED2 price controls. The final determinations represent a £2.9 billion decrease when compared with the total expenditure allowances requested by DNOs in their business plans but a £1.3 billion increase when compared to the regulator's dra¡ determinations published in June last year. Rob Horgan, news editor Cost allocation dispute

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