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The Topic: Totex TOTEX THE TOPIC 14 | 11TH - 17TH DECEMBER 2015 | UTILITY WEEK "I would have hoped that the shift to totex would drive innovation in soft, social and distributed infrastructure." l Jacob Tompkins Chair of Ofwat's resilience working group and managing director, Waterwise T he shi to a totex regime by Ofgem, and then Ofwat, has coincided with a period where keeping a cap on cost is crucial and prices are more keenly watched than ever before, especially when the beady eyes of politicians are firmly on the sectors. The totex shi aims to drive utilities to get better value for money over the lifetime of their assets, which in some cases can be 50 years or more. This chimes with the "more for less" attitude taken by regulators in recent years. The latest set of price controls, of which totex forms a part, will result in household bills being reduced by more than The remorseless pressure on bills The energy and water regulators are looking to totex to help alleviate the severe political pressure to reduce utility bills. "The totex shift aims to drive utilities to get better value for money" Totex at Utility Week Live Totex will be a key theme at the Utility Week Live exhibition and conference that takes place at the Birmingham NEC on 17-18 May 2016. Workshops, round table debate and seminar sessions at this event will seek to tease out best practice approaches to working under a totex regime and highlight the biggest challenges for organi- sations transitioning from the old capex/opex approach. Cutting customer costs AMP6 savings: 5% or £20 a year on the typical household bill by 2020 ED1 savings: £10 saving off typical customer bills per year GD1 savings: will reduce from £141.02 in 2013-14 to £133.29 by the end 2021/22 T1 savings: In 2013-14 the average electricity transmission charge increased by £0.81 from £21.787 to £22.59 and the average gas transmission charge decreased by £2.95 from £16.63 to £13.68. £40 a year by the start of next decade. In a world of austerity and "hard working families" any real-term cut in bills is welcome. Former energy and climate change committee chair Tim Yeo was vocal about the impact that energy transmission and distribution companies had on bills, and in February this year called for Ofgem to "crack down" on these costs. However, at the same time he did admit that the new RIIO price control was "an improvement on what went before" in terms of limiting the cost impact to consumers. By switching to totex and the new regulatory regimes, Ofwat and Ofgem are getting the utilities to take a longer-term view on their infrastructure and to think about the lifetime cost. The result is that rather than building a new asset and seeing its valued added to its regulated capital value, ongoing and potentially cheaper solutions can now be used without the energy and water companies missing out financially as a result. TOTAL INDUSTRY NET CAPITAL INVESTMENT 1990/91 - 2014/12 £ million 6 5 4 3 2 1 0 Source: Ofwat Actual capital maintenance Actual copal enhancements Forecast capital maintenance Forecast capital enhancements AMP1 AMP2 AMP3 AMP4 AMP5 90/91 91/92 92/93 93/94 94/95 05/06 06/07 07/08 08/09 09/10 95/96 96/97 97/98 98/99 99/00 10/11 11/12 12/13 13/14 14/15 00/01 01/02 02/03 03/04 04/05