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Utility Week 30th September 2016

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12 | 30TH SEPTEMBER - 6TH OCTOBER 2016 | UTILITY WEEK Policy & Regulation Analysis O n 24 June and the days that followed, REM must have seen a bounce in the charts because the band's 1987 hit It's the End of the World as We Know It surely filled the airwaves. It certainly fitted the mood of many individuals and businesses as the reality of the Brexit vote hit home. One hundred days on, and how is the new world shaping up? The economy bore the brunt of the initial shock from the referendum result. Sterling plummeted to 30-year lows, Britain's AAA rating was lost, and billions of pounds were wiped off the FTSE 100. However, as traders realised the vote had changed nothing for mar- kets in the immediate term, shares recovered. Politically, seismic shis have occurred. In a post-referendum whirlwind, David Cameron first stood down as prime minister and then le Westminster altogether when he abruptly quit as an MP. Meanwhile, a short Conserva- tive party leadership race saw Theresa May see off her challengers and enter Number 10. May swily created a new Department for Exiting the EU and placed it under the lead- ership of Brexiteer David Davis, while other prominent Leave supporters – Boris Johnson and Liam Fox – took the helm at the Foreign Office and Department for International Trade. In terms of tangible cuts to the UK's European ties, however, little has actually progressed since 24 June. May has boldly claimed that "Brexit means Brexit", but it remains unclear whether that means hard Brexit, so Brexit, or something in between. That lack of clarity is likely to remain in the short term – at least until article 50 has been triggered – which is expected to hap- pen early next year. We then face two years of negotiation and continued uncertainty about the terms of exit since Davis has said parliament will be kept in the dark about most of the detail. Brexit uncertainty is unsettling for busi- ness and energy suppliers certainly showed their unwillingness to absorb Brexit risks when 12 firms pulled their fixed-term deals and replaced them with higher tariffs – citing the fall in sterling as the reason. However, despite the scope for consider- able long-term change, most utilities have resisted the urge for knee-jerk reactions. As consultancy Baringa observes, "the energy industry is unlikely to radically alter in the near term", with medium and longer term impacts relying on the single market negotiations and Britain's access to the Inter- nal Energy Market. Other negotiations to extricate environ- mental and water policy will similarly be long term and drawn out impacts, to which companies can gradually adapt, rather than sudden shocks. Some companies have expressed concern that asset investment will become pricier due to hiked costs for imported parts. On the whole though, regulated utilities are hopeful that Brexit may make their slow and steady returns more attractive than ever to cautious investors and, aer an unnerving delay on the decision to invest in Hinkley Point C, government has reas- sured industry that Britain is still open for 100 days later One hundred days on from the referendum, how much of the pre-Brexit world has ended? How much is still the same? And how much is still shrouded in uncertainty? Utility Week investigates. "The extent to which the UK might be able to disregard EU law requirements will depend on the type of post-Brexit relationship that the UK and the EU will agree." Dr Totis Kotsonis, partner, Eversheds To read his full blog, visit: http://bit.ly/2d4n4NX EURO PER GBP 1.294344 1.254720 1.215095 1.175471 1.135847 May 2016 Jul Sep

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