Utility Week

24 | JUNE 2023 | UTILITY WEEK Energy No time to lose Ofgem has published three consultations that pose signifi cant questions about regulation, but is now the time to put everything on hold when net zero is the imperative? Comment I n the forward to the three recently launched Ofgem consultations, interim director of infrastructure and security of supply Akshay Kaul stresses that, given the imperative to meet net zero "this task is now vital and urgent. There is not a moment to lose". However, in its desire to stand back and consider a radically di• erent approach to regulation Ofgem risks a hiatus at a time when we can least a• ord it. What is lacking across the trio of documents is any sense of how we can maintain momentum while Ofgem goes back to • rst principles and has a think about frameworks and archetypes. What would an "agile" approach look like in this context? There is also a sense that Ofgem is looking to o€ oad as much as it can on to the new Future System Opera- tor (FSO). While the creation of the FSO does provide a real opportunity for a whole-systems view and some industry leadership, we need to be careful not to assume it can do everything from day one, when the legislation to create it is still wending its way through Parlia- ment and it will take time to build new capabili- ties. And is what Ofgem is suggesting the FSO do appropriate for a national body given the real action on decarbonisation of heat and transport will be happening, as Ofgem says, "street by street and town by town"? The time pressures point to two key asks. First, on local governance, the ENA Open Net- works programme (which already includes the Electricity System Operator) must keep pushing forward in the interim on market facilitation and system planning. Second, on RIIO, Ofgem must decide quickly if it is just going to rollover the gas distribution price control and, if so, ensure that this does not result in two wasted years. Local governance The Open Networks programme came in for some stick from Ofgem but, as chair of the Open Networks Chal- lenge Group, my sense is that most stakeholders are sup- portive of the work it does – albeit everyone would like to see the pace accelerated. Upping the pace requires more resources and a governance structure that means they do not simply proceed at the pace of the slowest. Of course, the radical changes that Ofgem is propos- ing with a substantial role for the FSO will have been helpful in focusing minds at the ENA but there is more Ofgem could do to drive progress. Ofgem used to attend the Open Networks Steering Group where it could use its in" uence to drive things forward. It withdrew last year but if it wants to e• ect real change on the ground, it should re-engage. Also, Ofgem has only just put in place a new DSO incentive as part of the RIIO-ED2 price control. This should be used to help drive the progress that Ofgem wants to see – with more emphasis put on collaboration, rather than the competitive spirit that RIIO • nancial incentives all too o— en engender. In both cases there is a real question at a practical level of what Ofgem is asking the FSO to do. Is it simply a coordination/ facilitation role or is it actually taking over the doing? To answer this Ofgem needs to under- stand what happens now, what works well and what doesn't. In a recent local governance webinar, Ofgem said that it was keen to explore this through a series of working groups once the consultation closes. That can't happen soon enough. to create it is still wending its way through Parlia- ment and it will take time to build new capabili- ties. And is what Ofgem is suggesting the FSO do appropriate for a national body given the real action on decarbonisation of heat and transport will be happening, as Ofgem says, "street by street and town by town"? The time pressures point to two key asks. First, on local governance, the ENA Open Net- works programme (which already includes the Electricity System Operator) must keep pushing forward in the interim on market facilitation and system planning. Second, on RIIO, Ofgem must decide quickly if it is just going to rollover the gas distribution

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