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UTILITY WEEK | 4Th - 10Th JULY 2014 | 13 Policy & Regulation This week British Gas: NAO must analyse network costs British Gas calls for an independent party to look into whether DNOs are taking us for a ride Electricity distribution and transmission costs should be scrutinised by the National Audit Office (NAO), MPs were told on Tuesday (1 July). Giving evidence to the Energy and Climate Change Committee (ECCC), Andy Manning, head of network regulation at British Gas, said "detailed independent analysis" was needed on network company returns and the NAO was "an appropriate body to do this". Manning said networks were "able to consistently out- perform their targets" and were therefore being rewarded, even though they may have been a poorer performer com- pared with other distribution network operators (DNOs). He said: "To ape a competitive market we should see high-performing networks prospering and poor-performing networks struggling – and that isn't what we're seeing." ECCC chair Tim Yeo said this was a result of "the feebleness of the regulator" and questioned UK Power Networks chief executive Basil Scarsella as to whether electricity customers would be satisfied that "even the worst-performing DNOs are rewarded as if they have above-average performance". Scarsella responded that the regulatory regime worked, because it allowed poor-performing networks to be penalised and good-performing networks to be rewarded, and consumers would be "very satisfied". He added: "When I look at my network, and the other networks, the reliability has improved, customer service has improved, and costs have decreased, so it's only right they are rewarded." MB WaTEr Directive's targets 'tough to meet' The Environment Agency has said that targets under the Water Framework Directive (WFD), whereby 32 per cent of water bodies will be required to reach "good" classification by 2015, will be "tough to meet". Currently, just 27 per cent of water bodies in England are classified as being of good status under standards set out in the WFD. Under the EU rules, all water bodies must meet this target by 2027. An Environment Agency spokesman said: "We know Euro- pean standards will be tough to meet in the coming years – given the country's combination of industrial legacy, urban develop- ment, transport infrastructure, farming activity and popula- tion growth – but the target is a useful driver for restoring rivers across the UK and Europe." There is wide-ranging accept- ance that the target is unlikely to be met, with trade body Water UK claiming that no EU member state is likely to make the 100 per cent target in 2027. ELEcTrIcITY WPD challenges Ofgem decision Western Power Distribution (WPD) has issued a judicial review against Ofgem's decision on electricity distribution losses. WPD has issued the judicial review in relation to the amount of money it had to pay back to the regulator following the close of the fourth distribution price control (DPCR4) losses incentive mechanism. The mechanism was designed to drive the electricity distribu- tion network operators (DNOs) towards achieving an "efficient level of losses" of energy on their networks. In March, Ofgem said WPD had to repay a total of £109.9 million as the DPCR4 losses mechanism was closed. This was the bulk (68 per cent) of the total £161 million the electricity DNOs had to return to electricity customers. ELEcTrIcITY Total of 53.3GW to be procured through capacity mechanism The government plans to pro- cure a total of 53.3GW of electric- ity generation capacity through the capacity mechanism. The first capacity auction, which is scheduled to be held in December, will auction off 50.8GW of capacity, with the rest being auctioned off in late 2017. The capacity procured in these auctions should be ready for delivery in 2018/19 and represents more than 80 per cent of the peak electricity use in the UK today. Wires: are poor performers paid too much? Political Agenda Mathew Beech "Could there be an upside to Juncker for Cameron?" President Juncker – two words that scream failure to prime minister David Cameron. Aer the Tory leader's doomed attempts to prevent the former Luxembourg premier Jean-Claude Juncker getting the European Commission's top job, Cameron now has some grovel- ling to do to prevent the UK slid- ing towards the EU's exit door. The PM has said he can "do business" with Juncker, despite saying his appointment was "a bad day for Europe". bring down UK energy prices – a plus for Cameron. Also, this will reinforce the EU 2030 carbon target ambitions looking to cut emissions by 40 per cent, which the UK is pushing for. Couple this to Juncker's state- ment he is "fully committed" to finding a solution to British concerns, and Cameron may actually be able to snatch some semblance of victory from seem- ingly inevitable defeat. Or at least, that's what his party and backbenchers will be hoping for. But collateral damage to the Conservatives' pro-Europe/ anti-Europe stance may have been inflicted. The Tories' thorn to their right, UKIP, has tried to make hay and is pushing even harder for Brexit, while Labour has accused Cameron of being "cack-handed" and creating a "catastrophe". And it's easy to see why. The UK can now only list Hungary as an ally in the EU, and the top man wants more powers to go to Brussels. But could there be an upside? If Juncker gets his way, the sin- gle energy market could get a step closer – which will help boost interconnection and potentially