Utility Week

UTILITY WEEK | 28Th March - 3rd aprIL 2014 | 9 Policy & Regulation This week Watchdogs team up to improve regulation UK's economic regulators to pool resources in bid to improve consistency and enhance efficiency The chief executives of the UK's nine economic regulators have joined together to launch the UK Regulators' Network (UKRN), to improve co-ordination across regulated sectors to enhance investment and efficiency for the benefit of consumers. As well as Ofgem and Ofwat, the group brings together the Civil Aviation Authority, the Financial Conduct Author- ity, the Office of Communications, the Office of Rail Regulation and the Northern Ireland Authority for Utility Regulation. Monitor and the Water Industry Commission for Scotland are participating as observers. It is hoped the group will allow regulators to work more closely on issues of cross-sector significance and to learn lessons across industries that help to improve regulation and the promotion of competition in order to secure better outcomes for consumers. UKRN's three main objectives are: to improve the con- sistency of economic regulation across sectors; deliver efficiency of regulation; and to improve understanding of how independent economic regulation works in the interests of consumers, markets, investment and eco- nomic performance, identifying scope to do better. The network's initial areas of focus will include facilitating efficient multisector investment projects, promoting customer engagement and switching in regulated markets, assessing cross-sector resilience and cyber-security and developing a clear understand- ing of the overall affordability of regulated services for consumers. CM WaTEr Ofwat sets new cost allocation rules Ofwat has asked water com- panies to submit updated cost allocations under new rules for PR14. The regulator said that a consistent set of data was essential for setting whole- sale and retail price controls because of the introduction of non-domestic retail competition scheduled for 2017. However, Ofwat said a number of companies had not followed guidance set out in its methodology for the price review and it was therefore introducing new rules. Ofwat also claimed more detailed cost allocations were important because it would allow the regulator to compare "apples with apples" when set- ting price controls. The regulator acknowledged that setting further rules contra- dicted its hands-off approach to PR14, but said in this case they were necessary. In a statement, Ofwat said: "We recognise that detailed regulatory requirements are at odds with the general principle of giving companies owner- ship of their business plans for PR14, but given the particular industry issues, of market opening and controls based on comparative costs, set out above, we consider that further rules are needed in this instance." All companies will have to resubmit data by 27 June. rEnEWabLEs Ecotricity opts for obligation scheme Ecotricity has opted to use the existing Renewables Obligation scheme rather than the new con- tracts for difference (CfD) regime for its new 54MW windfarm. The company was granted planning permission for the Heckington Fen windfarm in Lincolnshire 12 months ago. The deadline for the Renewables Obligation scheme is 31 March 2017, although the Department of Energy and Cli- mate Change (Decc) introduced a 12-month grace period for projects still finalising grid con- nections or radar upgrades. This extension has allowed Ecotricity to opt for the obliga- tion system. Dale Vince, founder of Ecotricity, said: "CfD comes with new risks and uncertainties that are difficult to quantify. "It's not just because it's new – it's a very different approach and it introduces a lot of new risk for projects. "While we will have to deal with CfDs eventually – as the only game in town – for now we have the choice and the Renewa- bles Obligation is a far simpler and less risky process." Ofgem: working with the UK's other regulators Political Agenda Mathew Beech "Government will want to be seen as being in control" How the opposing political par- ties play – or grab the headlines – in the wake of the Competi- tion and Markets Authority referral (expected on Thursday a£er Utility Week went to press) could shape the outcome of the general election next May. Labour will aim to have Ed Miliband on the front pages, say- ing, "I told you so." The opposi- tion kick-started the energy debate at the party conference in Brighton, setting out plans to reform the energy market and instigated the CMA inquiry, with Ed Davey outlining a potential break-up of British Gas in a letter to the regulator in February. The Tories – gunning for an outright majority – will hope the CMA fallout shows them to be capable in what is perceived to be their weak suit of energy. The CMA referral will have two consequences: energy firms will fear for their vertically inte- grated futures; and at Westmin- ster, the main parties will scrap to show voters they got it right. throwing in a price freeze. Miliband and shadow energy secretary Caroline Flint will use the referral to claim they were right to call for radical changes in the "broken market" – championing the cost of living crisis that plagues millions of hardworking families. But the opposition will not have it all their own way, because those on the govern- ment benches will also be look- ing to make political hay. The government will want to be seen as being in control of the situation – not responding to the shots of the Labour leader – and, crucially, making a difference to consumers. It is likely to claim it

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