Utility Week

UTILITY Week 23rd January 2015

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16 | 23rd - 29th January 2015 | utILIty WEEK Roundtable Network transformation and adapting to RIIO 14 January, 2015 Policy & Regulation Culture change is crucial to the future of UK networks S pringing off recent research into dis- tribution network operator (DNO) expectations of life under the RIIO regime, a Utility Week roundtable last week, held in association with Tata Consultancy Services, sought to bring to light the hopes and concerns of a variety of stakeholders in the ongoing process of UK network transformation. Utility Week editor Ellen Bennett opened the meeting with some observations on the outcomes of the RIIO research (available to download at www.utilityweek.co.uk/down- loads). She highlighted the widespread pessimism expressed by DNOs regarding the expected benefits of smart metering and expressed surprise at the high proportion of respondents (one third) who said they doubted smart metering would help them deal with outage management. Attendees responded with opinions on the still smarting pride of networks which had hoped to lead the UK smart meter programme rather than suppliers. Others observed that the DNOs seem to find it con- sistently difficult to understand the business case for increased use of customer data, but are on a journey towards doing so. Turning to address the implications of Ofgem's final determinations for the DNOs, many doubted the threat of a referral to the Key quotes Competition and Markets Authority, despite protests from a number of networks that the controls were too harsh. It was pointed out that risks of a referral are high. One delegate said that supporting a CMA referral could almost paralyse a business and that its out- comes "may leave you worse off than before". As discussion of the DNOs' approach to RIIO developed, a number of comments were made regarding the quality of the business plans submitted during ED1. While Sha- ron Darcy, a member of Ofgem's Consumer Challenge Group, said she felt the plans had shown a marked improvement on those submitted during Distribution Price Control Review 5, many still lacked what she termed "a golden thread running through" – mean- ing a clear and coherent message linking top level objectives with financials and opera- tional detail. A key conclusion from the roundtable was that DNOs still need to make a signifi- cant cultural shi if they are to adapt to life under RIIO. There remains a significant gap in understanding how to execute effective customer centricity and the potential for a changing role in the energy system. Crucially, this challenge will need to be met with increased collaboration, knowl- edge-sharing and a significant shi in the traditional DNO skills base. Sharon Darcy member, Ofgem Consumer Challenge Group "You don't have to wait for the smart meter rollout to rec- ognise that we live in a data-rich world. Smart metering will revolutionise things, but getting into the mindset of being a data business, a business that uses intelligence to drive decisions, is a jour- ney the companies are still on." "It's easy to put forward innovation when you have a Low Carbon Net- work Fund to bid into - it's not your money. But that will not necessarily be good innovation. We want to see innova- tion that addresses a real business need, or where it will be used to manage risks and challenges. With some companies you still get the feeling that innovation is a standalone activity."

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