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UTILITY WEEK | 20TH - 26TH JANUARY 2017 | 9 Policy & Regulation This week Ofgem plans for separation of SO role Regulator asks National Grid to hold a separate transmission licence for system operation Ofgem and the government have put forward plans to force National Grid to legally separate its system operator (SO) role from the rest of the group to address perceived conflicts of interest. Ofgem opened a consultation on 12 January on its proposals to achieve greater independence for the GB electricity SO role by asking National Grid to legally separate that entity and to hold a transmission licence for system operation that is separate from the transmission operator's existing licence. The new SO entity, although wholly owned by National Grid plc, will also be required to have its own board and to employ distinct employees at separate offices under Ofgem's plans. Launching the consultation, Ofgem chief execu- tive Dermot Nolan said that, as the UK's energy system changes to allow for decarbonisation, decentralisation and greater energy flexibility, it is "important that all the monopoly networks adapt. Having a legally separate system operator will allow it to take on a more proactive role in managing the system and working with others, while mitigating any conflicts of interest". Energy secretary Greg Clark added: "Separating our system operator will give greater confidence to investors that Great Britain offers a level playing field for compa- nies wanting to be part of our clean, secure and flexible energy system – keeping costs as low as possible for our homes and businesses." Responses to the system operator consultation are required by 10 March. JG See analysis, p15 ELECTRICITY 'Piecemeal' changes hinder smart power "Piecemeal" changes to network charging, including proposed reforms to embedded benefits, are hindering the smart power agenda, the Solar Trade Associa- tion (STA) has warned. The government should com- mission an "independent holis- tic review of network charging" and enact "fundamental rather than incremental change". "The current piecemeal approach too oen results in decisions that run counter to the smart power agenda," the industry body argued. The STA was responding to a call for evidence by Ofgem and the Department for Business, Energy and Industrial Strategy (BEIS) on the formation of "a smart, flexible energy system". Ofgem is due to make a deci- sion on embedded benefits – the financial upsides enjoyed by distribution-connected genera- tors – in the first half of this year. WATER Ofwat vows to watch retailers closely Ofwat has warned water retailers that it will keep a close eye on them when the market opens in April, and will "take action" against any form of misconduct. The regulator last week set out its plans for monitoring the business retail market. It said it will use water retail company reports, the experience of cus- tomers and water retailers, any complaints it receives, market research and proactive checks, to "get a full picture of the market". It will then intervene where there is a risk to the effective operation of the market, or where there is significant detriment to customers. Ofwat has launched a con- sultation on how it monitors the market to protect customers, which closes on 10 February. WATER Market opening will be a 'damp squib' The opening of the water retail market for business customers will be "a damp squib for most people". Lord Rupert Redesdale, chair and acting chief executive of newly launched The Water Retail Company, warned that although certain companies may find mar- ket opening busy and exciting, "for a lot of people it is going to be a damp squib". He told Utility Week that day one should not be considered a "big bang moment" and that awareness among businesses, especially SMEs, will be virtually non-existent, creating "a massive problem for incumbents". "The first they're going to know is when they get a new bill coming in," Redesdale said. Nolan: 'all the monopoly networks must adapt' Political Agenda Mathew Beech "Hard Brexit seems to be the direction the UK is headed" "Brexit means Brexit" was the default comment from Theresa May shortly aer she took residence in Number 10. Now, that Brexit is set to be a bit clearer following her speech on Tuesday 17 January. Those keen for a close relationship with our European neighbours were le disappointed. Hard Brexit, where the priority is having control of our borders at any cost – including trading links and access to the single market – seems to be the when it comes to Brexit, that we get the best deal for Britain – including the utility companies and their customers. Longer-term impacts on investor willingness to come to the UK and put their cash into big infrastructure projects such as new nuclear will only become clear in time, but a wobble for the pound even before May made her speech is cause for concern. Brexit may mean Brexit, but what that means for utilities and customers still remains unclear. direction the UK is headed. The three Brexiteers of Davies, John- son and Fox will be delighted. Europhiles, including business and energy secretary Greg Clark, although publicly supportive, may be privately less enamoured. Hard Brexit could see infla- tion rise, trading becoming more difficult, tariffs imposed, and the costs of importing – ultimately passed on to consumers – increase. This will go for a wide range of products and services, including oil, which has a big impact on the cost of energy. Careful negotiations and precise posturing are essential to ensure, as all politicians say