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16 | 20th - 26th June 2014 | utILItY WeeK Policy & Regulation This week Ofwat to 'ruthlessly prioritise', says Ross Regulator will have to shed 46 jobs as it budget is slashed by 30 per cent Water companies will be asked what information they should submit to the regulator in a con- sultation this autumn, as Ofwat seeks to define a new strategy. The regulator, which is enact- ing a 30 per cent budget cut handed down from government and is set to shed 46 jobs this summer, is seeking to "ruth- lessly prioritise" its interventions in the sector. At a strategy day last week, chief executive Cathryn Ross laid out the emerging plans and sought feedback from stakeholders including water company chief execu- tives, customer groups and green NGOs. The group agreed that the vision for the water sector was "trust and confidence" created by outcomes – customers getting what they want and can afford – and strong relationships throughout the sector. To deliver this, Ofwat will continue the focus on outcomes that has characterised PR14 – earlier price reviews focused more on inputs and processes. It will seek to work collaboratively with other organisations – for example, as in its current work with the sector on alternative dispute resolution. Ross said: "If we are focusing on the stuff that mat- ters most, how do we know what that is? We need to develop a new dashboard that answers the questions: what does good look like and are we moving in the right direction? We have been trialling some new KPIs this year and we will be coming out in the autumn on new KPIs that will be more aligned with our new strategy." Ofwat will publish a dra strategy in the autumn. EB eLectRIcItY Red tape threatens to close Aberthaw Aberthaw coal-fired power sta- tion faces closure over a techni- cal breach of European law. RWE Generation is consider- ing an investment in the 1.6GW plant so it will comply with tightening emissions standards and stay open into the 2020s. However, the European Com- mission has launched infrac- tion proceedings against the UK government over the way it has applied EU regulations. The UK had been granted a relaxa- tion of emissions rules to allow Aberthaw to burn locally mined Welsh coal, which is more dif- ficult to ignite than other types of coal. The Commission is now challenging the UK's interpreta- tion of that provision, saying it was meant to apply only to coal with less than 10 per cent vola- tile matter. Aberthaw's feedstock has between 6 and 15 per cent volatile content. The dispute could force RWE to close the plant by 2016. eLectRIcItY Offshore regime 'fully commences' Offshore windfarm developers have been given greater control over their grid connections aer a new legal regime officially kicked in last week. The offshore transmission regime set up by Ofgem and the Department of Energy and Climate Change has "fully com- menced", meaning Ofgem now regulates and licenses the cables in British territorial waters. Offshore wind developers may build their own transmis- sion links before handing them over to an offshore transmission operator to own and operate. A new provision allows them to take 18 months for live testing before the handover, to give greater certainty. eneRgY Rejig 'misleading' profit indicators Ofgem must correct the "mis- leading impression" it gives consumers about supply profits, according to the managing direc- tor of British Gas. In his response to Ofgem's letter calling on the big six sup- pliers to explain the impact fall- ing wholesale prices will have on bills, Chris Weston urged the regulator to change its Supply Market Indicators (SMIs). Weston said Ofgem should consider the SMI and the impact it has on consumer confidence. He highlighted that the latest SMI figures would have put Brit- ish Gas' profits at £800 million, "when the reality is that we have just had to issue our second profit warning in six months and analysts' consensus places us nearer £400 million". Ross: seeking stakeholder opinions Political Agenda Mathew Beech "Davey had to reassure Li the EU will not veto the project" Ed Davey will have been on his best behaviour this week as the UK entertained Chinese premier Li Keqiang. Having ironed his best shirt and polished his smartest shoes, Davey will have met premier Li, China's second most senior politician, and discussed trade and investment. For "trade and investment", read Hinkley Point C. The new nuclear project, which is still waiting for state aid approval from the EU, will be If not, there will be a black hole in both Hinkley Point C's construction budget and in the UK's future generation capacity. It all comes down to – in the immortal words of Benny Andersson and Björn Ulvaeus – money, money, money. EDF does not have the avail- able capital to fund the £16 billion development itself, so it needs substantial backing from those who do. And those who do are the Chinese. largely financed by the Chinese. Davey had to be seen to reas- sure Li and the Chinese money men that the EU will not veto the project – leaving the UK with the investors, but nothing to invest in. Despite the European Com- mission's scathing remarks about the subsidy, the contract for difference with EDF and the way it appears to fall foul of the EU's state aid rules, Davey had to put on a brave face. The UK energy secretary has said he is confident the Commission will make its deci- sion by October – but he had to convince Li the decision will be in their favour.