Utility Week

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Policy & Regulation This week Energy Ofgem acting chief executive says politicians must decide how they want the energy market run Renewable heat cast adrift by policy 'disconnect' No price regulation 'by the back door' If people want energy prices to be regulated, it should be done properly and not "by the back door", Ofgem's acting chief executive said on Tuesday. Speaking at Energy UK's annual conference, Andrew Wright said "there is nothing inevitable" about the UK's Miliband: fierce political debate market-based policy framework. Price regulation, nationalisation, cross- ubsidy s and institutional reform were all "legitimate matters for debate", he said. However, he added: "It is worth considering the impact that debate and the tone of the debate can have on the market." Wright, who is understood to have applied for the Ofgem top job, skirted around the political battle sparked by Labour leader Ed Miliband's price freeze promise. While the regulator must be politically neutral, the next chief executive will face considerable political pressure going into the next general election. In this context, Wright warned against drifting towards a system of "quasi-regulation" by default. "Either we put our efforts into creating a competitive market or we do regulation properly," he said. "If people do want these companies to be regulated, they should do it properly, not by the back door through a sort of moral suasion." Ofgem's annual competition review of the sector, in partnership with the OFT and CMA, will deliver its final assessment in late spring. "We will want to see fundamental progress" said Wright and the process could lead to a full market investigation "if appropriate". MD A "disconnect" between various government policies is leaving renewable heat out in the cold, MPs have heard today. The Energy and Climate Change Committee (ECCC) has been told there is "not enough of a relationship between the Renewable Heat Incentive (RHI), the Green Deal, and the Energy Company Obligation (Eco) to push heat pumps" into domestic homes. Kelly Butler, marketing director at BEAMA, told the committee that while "it is still quite early days" for the schemes, there will have to be "some changes" to them to encourage the rollout of heat pumps. Butler told MPs that Eco was a "complex programme" and links between it and the Green Deal were "causing some issues". He added: "There seems to be a lot going on in terms of consultation and policy making that seems to be disconnected. "We are very concerned that we have the Department of Energy and Climate Change pushing renewable heat and the Department for Communities and Local Government (DCLG) systematically taking it apart." Chris Davidson, chair of the policy development commit- tee for the Ground Source Heat Pump Association, said: "There is quite a bit of confusion in the marketplace. There is a poor understanding out there. Electricity CC sets harsh price control for NIE CC Northern Ireland Electricity (NIE) has been presented with a "new regulatory model" for its price control which offers the company a lower rate of return than terms it previously rejected. The Competition Commission has provisionally determined that "significant changes" are required to the price controls for NIE, after Northern Ireland's Utility Regulator and NIE failed to agree terms earlier in the year. The Competition Commission's plans offer NIE a 6.4 per cent (£69 million) lower rate of return than was allowed under the regulator's proposals for the period of April 2012 to September 2017. However, the new plan approves more funding for investment projects than in the previous, and rejected, price control plans. Professor Martin Cave, Competition Commission deputy chairman, said: "We found that the design of the historical price control system does not work in the public interest. Our decision involves a major redesign of NIE's price control conditions." Political Agenda Mathew Beech The energy heavyweights of Westminster went head to head last week and debated, among other things, who is to blame for the creation of the big six. Shadow energy secretary Caroline Flint led the opposition day debate by setting out what Labour would do during its 20-month price freeze – "deep structural reforms to the way this market works for the future". Defending Labour's flagship policy, she tried to debunk the "myth" that the energy market's "Who is to blame for the creation of the big six?" "can somehow be laid at the door of the previous [Labour] administration". She then took a swipe at the Conservatives, saying it was their policy in 1993 to remove restrictions on suppliers also being generators "which led to the vertical integration we have seen over the past two decades". Energy secretary Ed Davey, welcomed the debate, saying it gave him the opportunity to "expose Labour's so-called policies for the fraud they are". Davey compared the coalition's record with Labour's – highlighting lower rates of increases in gas and electricity bills. He added that the govern- ment "want[s] to do better, but we will not follow the record of the Labour party, which was dismal on prices and bills". Davey also said Labour "rigged the market", "it is Labour's big six". He told MPs: "We have seen a big growth in independent suppliers and competition, which did not happen under Labour." "Labour members now want to kill it. Having created the big six, they want to help them. We will not allow that to happen." UTILITY WEEK |15th - 21st November 2013 | 13

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