Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/476851
UTILITY WEEK | 13Th - 19Th March 2015 | 11 Policy & Regulation The 11th hour addition of a retail exit option to the Water Act has hindered the opening of retail competition, water minister Dan Rogerson has warned. Speaking last week at a Water UK conference, Rogerson said "there is still much to do" aer the provision for retail exit was added only two months before the bill passed into law. He said the industry also needs to "pick WaTEr Late changes to Act have 'hindered retail opening' up the pace" in introducing the reforms to ensure the market will be ready to open in April 2017. Rogerson added: "We now need to develop the detailed regulation [on] how [an] exit will work for all parties – customers, the water companies and for new entrants." Water Industry Commission for Scotland chief executive Alan Sutherland, who had been tasked with overseeing the development of the market reforms until Ofwat overhauled the scheme for a second time last month, said good progress is being made and "substantial momentum" in support of the programme has gathered. He added: "From where I sit, I have absolutely no doubt the retail market [will] open in April 2017. No ifs, no buts." This week British Gas refers five networks to the CMA British Gas appeals against Ofgem's £17 billion eight-year price settlement known as rIIO-ED1 The energy sector faces a second competition inquiry, as Brit- ish Gas has referred Ofgem's price settlement for five of the six electricity networks to the Competition and Markets Authority (CMA), Utility Week can exclusively reveal. Northern Powergrid, one of the five companies affected by the British Gas referral, has also sought permission to appeal against its RIIO- ED1 settlement on the grounds that the price control is too tough, according to a statement released by the CMA. British Gas is appealing against Ofgem's £17 billion eight-year price settlement for the companies, known as RIIO-ED1, having previously criticised the regulator for being too lenient in its price controls. But Northern Powergrid's referral has been made on the grounds that the control on how much the network can charge is too steep given its investment plan. "The company's eight-year plan, published in March 2014, would invest more than £3 billion in the infra- structure that underpins the regional economy. The plan includes significant service improvements and is the out- come of extensive engagement with customers and other stakeholders," Northern Powergrid said, adding that even with heavy investment its original plans would have allowed domestic customers' bills to fall by 10 per cent. But British Gas has said, in a document seen by Utility Week, that its grounds for believing controls should be tighter include the return of "double- recovered" revenues; Ofgem's asset life policy; the cost of debt; and procedural issues. The other four affected companies are UK Power Net- works, Electricity North West, SSE and Scottish Power. EB See analysis, p14 WaTEr Cox warns firms will face PR19 challenges Ofwat chairman Jonson Cox has warned water companies they will face "dynamic" challenges in the next price review. Speaking last week at a Water UK conference, Cox said that for the price control period starting in 2020, there will be a "dynamic upper quartile standard that moves during the period". This contrasts with the fixed benchmarks set out in the PR14 final determinations, under which all the water companies have the potential to achieve, and subsequently be rewarded for the upper quartile. Cox said making the bench- mark targets dynamic for PR19 will mean all water companies have to set themselves stretching targets for fewer interruptions, better drinking water quality, fewer pollution incidents, and improvements to resilience. He added: "That is us doing exactly what we should, which is trying to simulate the effects of competitive markets on a monopoly sector. "You've heard it now, so you can start to think about that." Cox also told delegates he personally believes the customer challenge groups that helped to shape the business plans of the water companies during the PR14 process "may have been hindered by not having good enough contemporary and competitive information on other companies". He added the challenge groups "did a good job of mas- tering what must have felt like a deluge of data" and that in the future, consistent and accessible data needs to be available to them to ensure appropriate tar- gets are set for water companies. Cox said if the groups had had access to this information during PR14, it would have helped them to endorse the targets subse- quently imposed by Ofwat. EnErGY Lib Dems pledge £2bn for efficiency Energy secretary Ed Davey has pledged to make energy effi- ciency part of the UK's National Infrastructure Plan, with invest- ment of £2 billion per year from 2018, if the Liberal Democrats are elected to power in the upcoming election. Speaking in his constituency of Kingston, the energy secretary condemned the Conservative Party for neglecting energy efficiency and vowed that, from 2018/19, the Liberal Democrats would spend a further £2 billion a year on improving energy efficiency in homes. He said: "It's really weird that building power plants and supplying new power is part of the National Infrastructure programme, but saving money, so you don't have to build the power plants, isn't. "I've argued with my Conserv- ative colleagues that this isn't the right thing and I haven't always won that argument, but it's going in our manifesto to make sure energy efficiency investment is seen at the same scale." Davey declared that his party's manifesto will include a "green Magna Carta" of five new green bills: the nature bill, the zero carbon bill, the green transport bill, the zero waste bill and the green homes bill. He concluded: "If Liberal Democrats are the next govern- ment, we'll not only build on what we've achieved – and I do believe we've achieved quite a lot – but we're going to do more and faster." Dim view: British Gas wants tighter controls