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UTILITY WEEK | 21sT - 27Th FEbrUarY 2014 | 13 Policy & Regulation This week Ofgem reforms aim to secure supplies of gas Gas shippers could face higher charges for cost of interruption during a gas supply emergency Gas shippers could face higher charges for the cost of inter- ruption during a gas supply emergency, under a blueprint for security of supply unveiled last week by Ofgem. Ofgem has overhauled the way it would deal with a gas defi- cit emergency (GDE). It said the likelihood of a GDE remains low, but it was "prudent" to put sound incentives in place to maintain secure supplies. Key features of the new regime are: cash out – charges for imbalance – will no longer be frozen under a GDE; domestic customers will no longer be protected from compulsory interruption of their supply in a GDE, but they will be compensated financially; a demand-side mechanism run through National Grid Gas will enable large consumers to enter contracts with a central buyer; and consumers will be disconnected according to cost rather than size. Ofgem said the cash out reform will "improve incen- tives on shippers and reduce the likelihood or severity of an emergency", by exposing shippers to the full value users place on keeping their gas supply. Cash out under the new system will remain "dynamic" and will not be capped. Where a portion of the network has to be isolated – thereby cutting off domestic users – the cost of isolation will be calculated at the accepted esti- mate of the value domestic customers place on keeping their supply – currently £14 a therm (about 50p a kWh). Domestic customers will be compensated only for the first day of interruption because their return to supply is beyond the control of shippers. TL Pan-UTILITY Homeserve fined £30m after probe Insurance firm Homeserve has been issued with a £30 million fine by the Financial Conduct Authority (FCA) because of "widespread failings". The FCA found Homeserve had "serious, systemic and long running failings" and fined the company a total of £30,647,400. An 18-month investigation by the FCA found a number of issues with the company, which sells insurance for boilers and burst pipes, in particular between January 2005 and Octo- ber 2011 when it mis-sold insur- ance policies; failed to investi- gate complaints adequately; its board was insufficiently engaged with compliance matters; and its senior management were reluctant to address risks to consumers if there was a cost implication involved. To date, Homeserve has paid a total of £12.9 million in con- sumer redress, and is expected to pay a total of £16.8 million. ELEcTrIcITY Government reduces risk for small players Independent renewable genera- tors will be able to sell power at a £25/MWh discount if other arrangements fall through, under government proposals published last week. The "oaker of last resort" mechanism is intended to cut risk for small players by guaran- teeing a buyer for their power, albeit at unattractive rates. Some suppliers, expected to include the big six, will be obliged to offer backstop power purchase agreements (PPAs) to generators who find themselves unable to secure commercial deals. They are expected to be used as a short-term safety net rather than a long-term arrangement. EnErGY Greatrex to take part in debate on security Shadow energy minister Tom Greatrex will join a number of high-profile industry figures in a debate on energy security at Sustainability Live. Greatrex, who has previ- ously served as a member on the Energy and Climate Change Select Committee, has been vocal about issues including shale gas and carbon capture and storage. Utility Week editor Ellen Ben- nett will chair the debate. "All too oen the focus is on scare stories about the lights going off. We want to talk about how poli- ticians, regulators and industry can work together to avoid that scenario," she said. For more information about the debate and to book your place at Sustainability Live, see www.sustainabilitylive.com. Low level: likelihood of a gas deficit emergency Political Agenda Mathew Beech "Those under 2ft of water don't care about the details" The political game has got a bit nerdy. Both sides of the house are seemingly obsessed with the statistics and working out a way to make the statistics back up their argument. The obsession with "the facts" only reinforces the notion of MPs being in the Westminster bubble. David Cameron proudly said the spending on flood defences in the current four-year period (£2.4 billion) is more than in the last four-year period (£2.2 billion) under the previous government. details of how much has – or will be – spent, they want gov- ernment helping to pump away the floodwater and to build new, improved flood defences. Energy consumers aren't look- ing at how much bills went up by and when – they want help to bring down their bills now. The details and the statistics are undoubtedly important, but even more important is ensuring the "hardworking people" of the UK actually feel the benefits behind the statistics. But shadow environment min- ister Maria Eagle said spending had actually fallen by almost £100 million between 2010/11 and 2011/12 and accused the gov- ernment of "fiddling the figures". In the energy arena, Ed Davey likes to remind Labour that between 2000 and 2010 – that is, when they were in power – gas bills went up by 12 per cent and electricity by 9 per cent, com- pared with 6 per cent and 4 per cent so far under the coalition. Labour oen hits back with figures that show bills have risen by an average of £300 a year under the coalition. However, those under 2 of water don't care about the