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The Topic: Competition COMPETITION THE TOPIC 14 | 18TH - 24TH NOVEMBER 2016 | UTILITY WEEK Ofto and Cato: transmission up for grabs One area of the electricity network system the government and regulators have opened to competition is the ownership and running of major transmission links. U nder the offshore transmission owners (Oo) regime, followed by the competitively appointed transmission owners (Cato) regime, new links to generation sources are not automatically owned by National Grid but instead go out to open tender. The Oo regime, which came into force in July 2009, is estimated to have made savings of up to £1.2 billion compared with what the previous system would have cost. OPEN NETWORKS In May this year, Ofgem chief executive Dermot Nolan said that in the next two decades energy network companies may lose their monopoly status and see the sector opened up to competition. Speaking at Utility Week Live, he stated that part of the vision for the energy system at the time of privatisation was that "regulated natural monopolies" would one day be open to competition. He said that on this count, …"we have not made as much progress as I would have liked" and that while suppliers are facing "challenges" in today's market, "I want there to be real challenges to network companies too. They may not have their monopolies in 20 years' time". Networks already face competition in some areas, such as connec- tions, but Nolan was talking about opening the entire sector. Energy systems catapult chair Nick Winser, appearing alongside Nolan at Utility Week Live, said the proposition was "interesting", adding that in a future with increased local balancing, distributed gen- eration and storage, it was feasible that "indirect competition" could come from these sources. It will be a challenge to "blend together" monopoly regulation with these disruptive technologies, he said. UKPN Services, sister company to regulated distribution opera- tor UKPN, is a leading electricity infrastructure company primarily competing for business in the defence, industrial and commercial, and transport sectors. The company acts as a distributed generation integrator to support clients in making their own transitions to a low carbon economy. Ian Smyth took the helm in September and here tells Utility Week his views on the industry and his plans for growth into traditionally regulated areas. Q: One of the reasons given for not allowing distribution network operators to own storage is to allow it to develop in a competitive market. Do you think DNOs should be allowed to own storage? A: "Why would you preclude an asset management company from using the best available technologies to help make a network more efficient, more resilient and more secure for customers? It would be entirely consistent within the aims and objectives of existing policy and regulation to allow DNOs to use storage as another technology to support that." Q: Is there a role for UKPN Services to own storage assets and contract services with UKPN? A: "Yes I do see that as a possibility, but subject to the regulatory framework. I don't see any problems with it, there wouldn't need to be any new regulation." Q: Do you see opportunities for UKPN in competition for onshore transmission when it starts? A: "Maybe. It would depend on the projects coming to market, we would evaluate on a case by case basis." Q: What about if competition is opened up for distribution assets aer 2023? A: "Yes. Distribution networks is what UKPN Services is all about, and what we are very, very good at designing, building, operating and maintaining. It's our core business. Obviously as we operate in a competitive environment we would think we are pretty good at that." Q: There is a big question mark over the future of innovation funding, do you think competitively awarded funding should continue or could there be a role for UKPN Services in taking on the helm for innovation? A: "If you look across the world, at Australia, the US, the Mid- dle East, Europe, competitions to support funding for technology innovations work really well. If we look at the Low Carbon Networks Fund we can see how technologies that wouldn't perhaps have come to fruition, coming to business as usual because of the commercial pressures, so there is definitely a role for government to fund and support technological innovation. I wouldn't like to see the Network Innovation Competition or Network Innovation Allowance disap- pear, but certainly we should expect the types of technologies and innovations being funded to change. The competition element ensures the right technologies get funded at the right time. Q: Does the competitive nature of your business make being customer centric easier? A: "There is definitely something fantastic about being in the com- mercial sector, you get feedback from your customer every day. You justifying your price, explaining your commercial proposition every day." Q&A Ian Smyth, director, UK Power Network Services Price comparison websites have carved out a place for themselves in the energy industry as a tool for creating competition and driving good deals. The two-year probe into the energy indus- try by the Competition and Markets Authority (CMA) found that while "substantial numbers" of customers are disengaged, price comparison websites (PCWs) are an "important means by which effective competition can". In its final report in June 2016, the CMA claimed the sites are well placed to raise aware- PRICE COMPARISON WEBSITES