Utility Week

UTILITY Week 3rd July 2015

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14 | 3RD - 9TH JULY 2015 | UTILITY WEEK Policy & Regulation This week Capacity market open to interconnectors Opposition from energy majors ignored as Decc confirms interconnectors can enter second auction Interconnectors will be eligible to participate in the second capacity market auction despite opposition from big energy companies, the government confirmed on Monday. This will allow foreign energy companies to contribute to the government's target volume of 45.4GW for delivery in 2019-20 through this year's auction. Eon argued that interconnectors should not be included in the capacity market because they are trans- mission, not generation, assets. In its hearing summary as part of the Competition and Markets Authority energy market investigation, the firm said it "did not support" the inclusion of interconnectors in the capacity market "due to how these were being treated for these purposes". RWE said it thought the current arrangements for including interconnectors in the mechanism on the basis of their ownership is "flawed". Centrica said it had "concerns" about interconnectors being allowed to take part in the capacity auction, although it would be "wrong to completely exclude them". However, as it published its parameters outlining the criteria for energy suppliers to apply and partake in the next capacity market auction, expected to take place in December this year, the Department of Energy and Climate Change (Decc) insisted that the inclusion of interconnectors will "increase the competitive pressure on the auction clearing price" and help ensure security of supply "at the lowest cost to consumers". The UK currently has 4GW of interconnection to Europe. LV ENVIRONMENT Government urged to extend LCF The Committee on Climate Change (CCC) has urged the government to extend to 2025 support for low-carbon tech- nologies under the Levy Control Framework (LCF) to ensure the UK's emissions reduction remains on track. In a report launched on Tues- day, the CCC called on the gov- ernment to give the power sector confidence to invest over the next ten years, by extending the LCF and providing rolling annual updates. It said doing this would also help to reduce costs and lower carbon emissions. To help cut carbon emissions further, the CCC called on the government to contract at least two more carbon capture and storage projects this parliament and to set out an approach to commercialise the technology. CCC chairman Lord Deben said: "Virtually all policies or funding in these areas are due to expire during this parliament. "Without significant new policies, progress will fall behind what is required to meet legal obligations through the 2020s." ELECTRICITY Networks face new regulatory reporting Energy regulator Ofgem has pro- posed a new form of regulatory reporting under which network operators separately report their RIIO performance and results. The regulator said the new RIIO accounts would "improve transparency" and provide clar- ity for all stakeholders, not just shareholders, to "create better value" for both consumers and investors. Improvements would include publishing information on a company's website about its performance against outputs and efficient expenditure targets. Ofgem is currently consulting on the new reporting method, which would be further devel- oped for implementation by March 2016. WATER Overhaul plan for company licences Water companies must be ready for market opening in 2017 or risk breaching their licence con- ditions, under plans published by Ofwat last week. The plans, out for consulta- tion until 20 July, would enshrine market preparations in a com- pany's licences, with three broad duties: a general obligation to carry out any required activities to ensure the smooth and timely expansion of the competitive retail market; a more specific obligation to carry out the set of activities defined in a formal transition plan; and to provide more information around areas of specific concern if necessary. Interconnector: 'transmission or generation?' Political Agenda Mathew Beech "Reducing big six's market share will be a Rudd priority" In the first energy and climate change question session of the new parliament, energy secre- tary Amber Rudd and energy minister Andrea Leadsom were asked repeatedly to defend the decision to end the Renewables Obligation a year early for onshore wind. Faced by shadow energy min- ister Julie Elliott, Leadsom stuck to the tried and tested line that this is all about cutting costs and saving the consumer money. "We cannot simply keep findings with great interest, but hinted that the government will step in: "There are still people on a default tariff, so something needs to be done to access them. I very much look forward to [the CMA's] response and, hopefully, to taking its guidelines to ensure we address that." What the action will be remains unclear, but promoting switching and reducing the big six's market share look set to be a priority for Rudd. The major suppliers have been warned. putting up the costs to the bill payer. My Department's priori- ties are to keep the bills down while decarbonising at the lowest cost possible, and that is what we will do," she said. "We do not want perma- nently to subsidise an industry that has the ability to stand on its own two feet." Saving money for consumers was something Rudd returned to – this time on the issue of the imminent CMA inquiry findings. When questioned by shadow foreign affairs minister Kerry McCarthy on what should be done to stop the "persistent exploitation" of sticky customers, Rudd said she awaited the CMA's

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