Utility Week

Utility Week 5th December 2014

Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government

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UTILITY WEEK | 5Th - 11Th DEcEmbEr 2014 | 17 Policy & Regulation This week Cox calls for 'radical' M&A in water sector Ofwat chair hopes for a more dynamic approach to mergers following the conclusion of Pr14 Ofwat chair Jonson Cox has opened the door to "radical" restructuring of the water market, calling for "dynamic and differentiated" approaches to any merger and acquisition activity that follows the conclu- sion of PR14. He said: "If there is going to be M&A, as I read daily in the press, I really hope we will see some very much more dynamic and differentiated approaches." Speaking in a personal capacity at a Utility Week reception to mark the 25th anniversary of the privatisa- tion of the water sector, Cox hinted that changes in the market could lead to the disaggregation of water com- panies. He said: "We see the opportunity to find benefits from thinking differently on who owns the regulated network business and who owns the customer-facing business, which is a retail business. Is there any reason why retailers and networks should necessarily be under common ownership, with all the difficulties that brings?" He added that the traditional "bigger is better" approach to M&A was redundant. Asked by Utility Week editor Ellen Bennett how many companies should be operating in the market, he said there was no right answer, but he expected M&A could result in more, rather than fewer companies. Utility Week's reception to mark the 25th anniversary of the privatisation of the water sector was held in asso- ciation with EC Harris, and a full report of the event will appear in Utility Week magazine on 12 December. MB EnErgY Ofgem fines Drax and Intergen £39m Ofgem has fined energy generators Drax and Intergen £28 million and £11 million, respectively, for failing to meet environmental targets under the government's community energy saving programme (Cesp). Drax Power delivered only 37.1 per cent of its Cesp target by 31 December 2012, while Intergen delivered 6 per cent, meaning that several thousand domestic customers missed out on energy-saving measures, such as lo and cavity wall insula- tion, and had higher energy bills as a result, Ofgem said. The programme was intended to lower carbon emissions through the delivery by energy suppliers and generators of these energy-saving measures free of charge to households in low income areas. In May 2013, Ofgem launched investigations into six energy companies that failed to deliver their obligations by the dead- line, of which Drax was one. The payments to the regula- tor "reflect the seriousness of the consequences of these failings for consumers", Ofgem said. Intergen's payment was lower than that for Drax because it took steps to mitigate its short- fall, delivering a further 61.2 per cent of its target by the end of May 2013. WaTEr Labour plans water licence reforms Water companies will have to switch customers struggling to pay their bills to their cheapest tariff, under proposals Labour plans to introduce if it wins next year's election. The "sweeping reforms" are part of a proposed national affordability scheme, which would reform water company licences so that the social tariffs could not be funded via increases in other customers' bills. The opposition party claims the costs could be financed by its work with water companies to recover bad debt, including forcing landlords to pass on details of tenants. Labour's reforms would also give the regulator new powers to modify company licences to cut bills, ensure companies behaved more responsibly and retained sufficient funds to enable them to invest in enhanced environ- mental standards and consumer support. Shadow environment secretary Maria Eagle, speak- ing at a debt advice centre last week, said: "It's time for a new deal with the water companies. Labour will reform the water industry, creating a national affordability scheme to support those customers who are strug- gling most with their bills." Cox: 'bigger is better' approach is redundant Political Agenda Mathew Beech "Labour needs a bounce to boost its election hopes Shadow energy secretary Caro- line Flint must have had a shock when she arrived at her office last week, because it appeared to have been ransacked by a fellow shadow cabinet member. Where is the evidence, you may ask. Just look at the contents of Maria Eagle's latest policy for the water sector. Labour's latest attack on the utility sector came from a debt management centre in Essex. The rhetoric was that the big water companies are not treating fall by 5 per cent in real terms under the next price control period and more social tariff schemes are being introduced. The answer lies in the polls. With the lead built on the back of the price freeze pledge and hard-hitting attitude towards the energy sector dwindling, they need another bounce to boost their election hopes. Attacking the utilities worked last year, so Labour is hoping the identikit policy for water will achieve the same result. customers fairly and need to be forced to put them on cheaper tariffs or face the consequences from a beefed-up regulator. Yes, I am referring to water, not the energy sector. This is not the first time Eagle has hinted at her party's stance to get tough with the water com- panies. She mentioned it at the party conference in September, although it got lost in the fallout of Miliband's economic amnesia. Undeterred, Eagle again outlined the National Affordabil- ity Scheme, under which water companies would be forced to put customers on cheaper tariffs. Why is Labour taking this hardline stance? Bills are set to

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