Utility Week

UTILITY Week 15th May 2015

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UTILITY WEEK | 15TH - 21ST MAY 2015 | 17 Policy & Regulation This week The UK Regulators Network (UKRN) is creating a cross-sector resilience plan to ensure the smooth running of the country's infrastructure. The group – which includes Ofgem, Ofwat, the Civil Aviation Authority, Ofcom, and the Office of Rail Regulation – is pulling together a cross-regulator emer- gency plan (CREP) setting out protocols and a framework for PAN-UTILITY Regulators to create cross-sector resilience plans the regulators to follow during a resilience incident. The framework would include thresholds for triggering its use, and when these were met, it would set out protocols for how communication would take place to allow impor- tant information to be shared between the affected regulators. The CREP would sit alongside an existing mechanism that would come into play during a major incident and would allow for direct regulator-to-regulator contact to maximise informa- tion sharing and ensure a co- ordinated response to major inci- dents with cross-sector impact. Ofgem and Ofwat joined the UKRN on its formation in March last year, and Ofwat chief execu- tive Cathryn Ross is currently chairing the group. £7.6bn low-carbon budget 'is blown' Policy Exchange claims the costs of LCF existing policies have been 'significantly underestimated' The new secretary of state for energy will inherit an empty fund- ing pot needed to support new low-carbon power investment, a leading think tank has warned. A new Policy Exchange report claims the previous govern- ment's "poor" handling of the Levy Control Framework (LCF) – which controls the financial sup- port available from consumer bills – has "significantly underestimated" the cost of its existing policies, meaning it could wipe out the budget unless changes are made. "The new energy secretary needs to take urgent steps to address this situation," said the think tank's head of energy, Richard Howard. "Decc must first recognise that the energy and climate budget has already been stretched to the limit – and factor this into its thinking." The LCF will be paid out to developers through the contracts for difference (CfD) regime and was set at £4.3 billion in 2014/15, rising to £7.6 billion in 2020/21, which will be levied against energy consumer bills. But the think tank has identified three areas in which the government may have underestimated the amount that will need to be paid out. First, it says declining whole- sale prices will increase the difference between the pre- vailing market rate and the set CfD strike prices, meaning the amount paid out to each low-carbon project will swell too. Second, the increased efficiency of onshore wind power could mean the projects will produce more power than expected, requiring higher payouts than anticipated. Finally, the amount needed to support small-scale pro- jects through feed-in tariffs has grown much faster than predicted – it was expected to reach £60 million a year to 2020, but the cost of the scheme has been growing at £160 million a year to date, the report claims. JA ENERGY Ovo: loss-leaders damage competition Independent supplier Ovo Energy has told the Competition and Markets Authority (CMA) it believes the big six are punish- ing loyal customers in order to subsidise attractive tariffs for active switchers. In its evidence to the CMA investigation into the energy mar- ket, Ovo said the big six are able to offer cheaper tariffs to attract switchers by using their large number of inactive customers to subsidise protective loss-leading tariffs. It highlighted the widen- ing gap between the big six's average standard variable tariff and their cheapest deals as evi- dence of this split energy market. Ovo said the use of these "protective tariffs" is damaging competition as independent sup- pliers' share of switchers rose by almost 30 per cent when they were removed from the market. The supplier is calling on the CMA and a "pro-competition" new government to ban loss- leading tariffs and introduce a principle of cost-reflectivity to the market to enable competition. RENEWABLES Brexit vote increases doubt over targets Re-elected prime minister David Cameron has thrown the UK's binding EU renewables targets into further doubt, pledging to deliver an in-out EU referendum by the end of 2017 following a successful election campaign in which his party vowed to cut onshore wind subsidies. Cameron told the press shortly aer his election victory that he would form a majority government committed to a ref- erendum on whether the country should remain a part of the EU. The party has already pledged to "halt the spread" of onshore wind despite binding EU targets to meet 15 per cent of energy demand from renewable sources by the end of the decade. Wind and wave power trade body Renewable UK blasted the Tories' manifesto pledge to end onshore wind power support ahead of the election, saying the pledge unwisely turns its back on the "significant contribution" made by wind power to the econ- omy and the electricity system. The body's chief executive Maria McCaffery has called on the new government to "confirm the importance" of onshore wind. ENERGY Voters oust select committee members The Energy and Climate Change Select Committee (ECCC) has seen four of its 11 members from the last parliament ousted from Westminster following the general election. Labour's John Robertson lost his Glasgow North West seat to the SNP's Carol Monaghan by more than 10,000 votes. The former deputy ECCC chair and Liberal Democrat Sir Robert Smith was one of the many casualties of a disastrous election for his party, coming third in the constituency of West Aberdeenshire and Kincardine. Former ECCC chair, Conserva- tive Tim Yeo, was deselected by his local party last February and did not stand in the general election, and his Tory ECCC col- league Dan Byles stood down. The other seven members of the committee – Conservatives Phillip Lee, Peter Lilley and Chris Pincher, and Labour's Ian Lavery, Albert Owen, Graham Stringer and Alan Whitehead – have been re-elected to parliament. Amber Rudd: advised to 'take urgent steps'

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