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Utility Week 24th February 2017

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12 | 24TH FEBRUARY - 2ND MARCH 2017 | UTILITY WEEK Policy & Regulation Analysis T hey may not garner the same level of attention as high-level government policies, but the nitty-gritty codes that govern the use of the UK's energy system are still incredibly important. Without the right structures and incentives, it will be impos- sible to create the smarter, more flexible system that Britain will need in future. The way in which these codes are formed should therefore be a key concern. For an example of why code governance matters, you need look no further than the capacity market. Small-scale distributed gen- eration has been the big success story so far, elbowing out the transmission-connected combined-cycle gas turbines (CCGTs) that the government wanted built. This was in no small part because of the triad avoidance payments that distributed generators are able to collect. Worried that it was giving an unfair advantage to distributed generation, in Janu- ary last year Ofgem launched a review into the payments in an effort to "level the play- ing field". The regulator will have the final say, but its decision will be strongly influenced by the recommendations of the Connection and Use of System Code (CUSC) panel, which scruti- nises proposed changes to the codes govern- ing the use of the transmission network. The panel members are obliged to act impartially, but several organisations are nevertheless worried that that they are fail- ing to represent the "full breadth" of the industry. They say the panel is stacked with employees from the big incumbents and they are not really listening to the concerns of the new kids on the block. In addition to an independent chair, a secretary and representatives from Ofgem, National Grid and Citizens Advice, the CUSC panel also has seven members represent- ing users of the code. Out of the seven, four are employed by big six energy companies – EDF Energy, Eon, SSE and Scottish Power – and the remaining three work for Drax, First Hydro Company and industry group Energy UK. "I have no reason to doubt that those who are acting on the CUSC panel are doing their duty and acting impartially," says Tim Rotheray, director of the Association of Decentralised Energy. "However, if I am someone who has been working in central generation, dealing only in central plant for my entire life, it is very unlikely that I've got the perspective of a decentralised generator at a chemical works. It's outside of my knowledge. It's outside of my experience." He says the panel's deci- sions are therefore likely to be "skewed in a particular direction". UK Power Reserve chief executive Tim Emrich agrees: "As anyone who has worked in both a big and a small company will know, there are profound differences in cul- ture, loyalties and thinking. It would be diffi- cult for panel members not to reflect their big company thinking and the votes show this." But he also has much harsher criticism of the panel, describing it as "mafia like". "The CUSC Panel is no longer a mecha- nism for the gentle tweaking of rules and reg- ulations to ensure they're fit for purpose," he says. "Instead, it's where National Grid and the big utilities pack the panel and reduce independence in generation, limit choices for the consumer, and maximise profit for their big corporates." UK Power Reserve is among the biggest winners of contracts for new distributed gen- eration in the capacity market and stands to take a big hit if triad avoidance payments are cut drastically. "We tried our best to present alternative positions but the working group and panel did not vote in favour of these positions," Emrich complains. "The chips are stacked against us." Mike Toms, the independent chair of the panel, has a very different perspective, say- ing panel members had a variety of views on what should happen with the payments. "The idea that they all acted like a kind of cartel and all voted for the same thing would be quite wrong." Toms says the panel members are elected by the parties that are subject to the code "so it is not a self-appointed club". He says he has "never heard any suggestion" of companies lobbying to get their employee voted in. Although he cannot "search the souls" of individual members, he says the panel "tries its best" to be objective. "On occasion, I have seen panel members express prefer- ences for positions that would not be posi- tions their employers would necessarily like, Down to the nitty-gritty Tom Grimwood asks whether the CUSC panel – which is scrutinising proposed changes to the codes that govern the use of the transmission network – is as independent as it could be. CUSC panel members Mike Toms, independent chair Nicola Medalova, alternate chair Heena Chauhan, CUSC panel secretary Nikki Jamieson, National Grid representative John Martin, code governance representative Nadir Hafeez, Ofgem representative Garth Graham, users' panel member (SSE) James Anderson, users' panel member (Scot- tish Power) Kyle Martin, users' panel member (Energy UK) Stew Horne, Citizens Advice Paul Jones, users' panel member (Eon) Paul Mott, users' panel member (EDF Energy) Simon Lord, users' panel member (First Hydro Company) Cem Suleyman, users' panel member (Drax)

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