Utility Week

UTILITY Week 18th November 2016

Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government

Issue link: https://fhpublishing.uberflip.com/i/751482

Contents of this Issue


Page 14 of 31

The Topic: Competition UTILITY WEEK | 18TH - 24TH NOVEMBER 2016 | 15 NEXT TOPIC: SMART METERING Smart meters are viewed as a gateway technology, opening the sector to the Internet of Things and greater connectivity. There is also the more immediate benefit of  giving consumers and their retailer an immediate view of their consumption, rather than relying on manual meter readings or estimates. However, the energy smart meter rollout has been plagued with delays, only now beginning in earnest, while the smart infiltration in water is further back, with many  customers not even having traditional meters. The next Topic will take an in-depth look at the development and rollout of smart metering across the utility sector. TOTAL SAVINGS BY TENDER ROUND (NPV, 2014/15 PRICES) 1,200 1,000 800 600 400 200 0 Estimated net benefits of the Ofto regime compared with counterfactuals (£m NPV) Benefit driver Counterfactual 1 Counterfactual 2 Counterfactual 3 Counterfactual 4 Counterfactual 5 "licensed merchant "merchant sale and "onshore TO led with the "onshore TO led with "zonal offshore TO with generator approach" leaseback arrangement" rollout of TPCR4 regime" specific offshore regime" specific offshore regime" Financing costs 380 266 8 17 84 Operating costs 49 49 232 232 172 Tax 191 146 112 112 126 Bid costs -35 -35 -35 -35 - Total benefit (inc tax) 585 426 306 326 381 Total benefit (exc tax) 394 279 205 214 256 BENEFITS OF THE OFTO REGIME "By providing the opportunity for investors to participate in the tendering of over £2 billion of assets in the next round, it should ensure the delivery of further value for consumers and contribute to reducing the overall cost of offshore wind." • Jonathan Brearley, Ofgem senior partner, networks "A period of sharp wholesale rises will result in a very useful shakeout. How many should we have? Maybe 15 to 20 companies, certainly not 50-plus." • Peter Atherton, associate, Cornwall Energy ness among customers of their ability to switch, reduce search costs for customers; and exert competitive pressure on energy suppliers by enhancing price transparency and facilitat- ing the purchasing process for customers. The recommendations in the report around PCWs include changes to Ofgem's Retail Market Review (RMR) rules to remove the confidence code, which requires the sites to show the whole of the market instead of just commission-paying suppliers. This remedy aims to allow retail suppliers to innovate with tariff structures and facilitate competition between PCWs by allowing them to negotiate exclusive deals with suppliers. The CMA said: "Our aim is to ensure that this potential for PCWs to promote competition to the benefit of customers can be realised by removing regulatory burdens that inhibit this role." The aim of the remedy is to encourage suppliers and PCWs to work together and offer exclusive deals for consumers – but this may not be the success the CMA is hoping for. Energy Helpline co-founder Mark Todd warns that only major sites will be able to offer exclu- sive tariffs because it is "not in the interest of suppliers to start setting up exclusive tariffs just for small comparison sites". Criticism comes from suppliers who could find it difficult to afford the commission charges of the major price comparison sites and therefore may not be shown if the confi- dence code if removed. GB Energy Supply's founder, Luke Watson, says the remedy is "completely illogical" and at odds with government policy to promote competition. As the market becomes ever-more com- plex, consumers need tools to simplify and sort the growing numbers of suppliers and tariffs, so it looks as if the sites have a huge part to play. And the CMA stands by its belief in PCWs. The report says that the use of the websites has increased over the past six years and chair of the investigation, Roger Witcomb, said "it's a very clear way of making the market work better". SJ source: Ofgem source: Ofgem Total savings (Em0 Counterfactual Counterfactual Counterfactual Counterfactual Counterfactual one two three four five TR1 TR2 TR3 8-15% is the estimated proportion of electricity genera- tion expected from offshore wind by 2020 in order to meet the UK target for renewables £52bn is an estimate of the potential investment in offshore generation, excluding transmission, by 2020 £8bn is an estimate of the potential investment in off- shore transmission by 2020 needed to connect wind OFTO NUMBERS

Articles in this issue

Archives of this issue

view archives of Utility Week - UTILITY Week 18th November 2016