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Policy & Regulation This week Ofgem seeks to apply same allowed return on equity as applied by the Competition Commission Finance rule change may cost DNOs £60m Distribution network operators (DNOs) could lose up to £60 million a year if Ofgem goes ahead with plans to overhaul how it calculates their finances. In a second blow to the DNOs, all but one of which were sent back to the drawing board with their RIIO-ED1 business Networks: double whammy plans last week, Ofgem made the surprise announcement that it may change the way it calculates their cost of equity allowance. The regulator said this would bring its approach in line with that of the Competition Commission. DNOs privately warned Utility Week that such a move could wipe tens of millions off their business plans for 2015-23, when they had already been asked to find further cost efficiencies. Taking the "worst case scenario" of a cut of 0.8 percentage points in allowed equity returns and assuming 65 per cent gearing, the annual cost to the sector would be around £60 million. Ofgem's move was triggered by the Competition Commission's provisional determination on Northern Ireland Electricity, published on 12 November. It estimated a 6.0 per cent return for shareholders, which Ofgem said was "significantly lower" than regulators had conventionally used. Electricity North West assumed 6.8 per cent in its plan, while the other five DNOs modelled 6.7 per cent. Ofgem said the Commission's position was relevant because its successor, the Competition and Markets A uthority, was the appeals body for RIIO-ED1. See analysis, overleaf. MD Nuclear Independent Scots would not support nuclear subsidies An independent Scotland would veto nuclear support such as that agreed with EDF Energy for Hinkley Point C, according to a white paper published on Tuesday. The report said a Scottish Government would not allow Scottish generation to be "compromised" by "expensive, longterm contracts for new nuclear generation". However, it expects to continue a system of shared support for renewables, claiming Scottish generation "will continue to be the most cost-effective means for the rest of the UK to meet its renewable ambitions". It would have an "energy partnership" with Westminster and continue to take part in a Great Britain-wide market with a single system operator, but with its own energy regulator. Energy Plan to save sustainable homes MPs have urged the Department for Communities and Local Government (DCLG) to reconsider plans to axe a policy that sets high standards on energy and water saving in the construction of new homes. In a report, the cross-party Environmental Audit Committee criticised the department for its decision to remove local authorities' discretion to use the Code for Sustainable Homes (CSH) in favour of "a lowestcommon-denominator" national standard. Joan Walley, Environmental Audit Committee chair, said: "The Secretary of State should think again before demolishing the Code for Sustainable Homes. The policy has been a big success in driving up home building standards, delivering local choice and supporting green exports. Building materials manufacturers in the UK told us that they use the code as a green kite mark when they sell their products abroad." Energy Climate change deal still possible World leaders have agreed to keep a global climate change deal on the table following fraught negotiations in Warsaw. Days after green campaigners staged a mass walkout from the UN climate summit in frustration at a lack of progress, participants reached a compromise on Sunday morning. The talks came close to collapse over the issue of whether developing countries should be obliged to cut emissions. A timetable was set to finalise a plan in Paris in 2015. Political Agenda Mathew Beech After keeping a low profile for the past five months while the Parliamentary Standards Committee investigated him for breaching lobbying rules – before clearing him last week – Tim Yeo looks like a man keen to make up for lost time. In one of his first public a ppearances since being cleared, the reinstated chair of the Energy and Climate Change Select Committee accused Ofgem of being "feeble". Speaking at a Westminster Ofgem "seriously feeble" and "seriously defective" Energy, Environment and T ransport Forum, Yeo strayed close to Labour's party line and said breaking up the vertically integrated companies to separate supply and generation would "at a stroke overcome the problem of a pretty feeble regulator in Ofgem, which hasn't done very much, and it would reduce the amount of public mistrust". But, in an effort to keep clear (Tory) blue water between himself and the leader of the opposition, Yeo also slammed Miliband's price freeze plan, saying this could "accelerate price increases" and that "it will deter some people from making the big capital investments we need in this country". Yeo continued the attack when he led the grilling of Ofgem's interim chief executive, Andrew Wright, saying there was something "seriously feeble" and "seriously defective" with its work – this time in relation to transmission and distribution. Other members of the committee also gave Wright a hard time, after they had been a ccused of giving energy suppliers an easy ride last month. UTILITY WEEK | 29th November - 5th December 2013 | 13