Utility Week

Utility Week 24th February 2017

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UTILITY WEEK | 24TH FEBRUARY - 2ND MARCH 2017 | 13 Policy & Regulation "The representation of consumers is so weak – and so flawed and indirect – I wouldn't have much confidence that the system is well set up to deliver for consumers." MATTHEW LOCKWOOD, SENIOR RESEARCH FELLOW, UNIVERSITY OF EXETER, ENERGY POLICY GROUP "Increasingly the types of decision they are making impact players who are not actively involved in the discussions. They don't have the expertise to participate in discussions, they don't have the time to participate in the discussions, and they often are not party to the codes which essentially prevents them from joining the discussion." JONATHAN GRAHAM, HEAD OF POLICY, ASSOCIATION FOR DECENTRALISED ENERGY "Ofgem either rubber-stamps these voting outcomes or does its own parallel impact assessments which are typically performed by the same consultants who depend on consulting revenues from the big utilities. It's a circular problem and a corrupted system." TIM EMRICH, CHIEF EXECUTIVE, UK POWER RESERVE "The system of self-governance enables expert assessment of a highly complex area, but fails where system change is needed and these parties have a commercial interest against the changes required to enable this transition. Our perception is that Ofgem is too willing to accept industry code modifications without objective scrutiny and alignment to strategic objectives." SOLAR TRADE ASSOCIATION "Ofgem does disagree with the panel's conclusions from time to time… I am not at all concerned that Ofgem would not have the ability or courage or energy to go against the panel if it felt it was right to do so." MIKE TOMS, INDEPENDENT CHAIR, CUSC PANEL "CUSC panel members operate in an independent capacity and do not represent the commercial interests of the companies and organisations for whom they work. The members are elected as part of an open process by signatories to the code and Ofgem attends as an observer. "Ofgem takes the views of panel members and the CUSC working group into account, however our final decisions on whether to approve change proposals are only made after we have carried out our own independent assessment." OFGEM SPOKESMAN because they are true to their obligation." If they were not "the system would become untenable". He points out that all CUSC members can put forward proposals and that code modifi- cations are not only scrutinised by the panel but by a wider working group as well. "Any- one who is interested in the issue, and they don't have to be a CUSC party, can ask to be on the working group." Matthew Lockwood, senior research fel- low at the University of Exeter's Energy Pol- icy Group, does not share Toms' trust in the process, which he describes as "self-authored regulation". He says there is a wider problem across a number of similar panels. As of October 2015, employees of incum- bents made up at least half of the mem- bership of all but two of the UK's code governance panels. For three of the panels, the employees of incumbents made up more than three-quarters of their membership. Lockwood says just because many of the panels' members are elected does not mean they are representative: "The trouble is it appears to be a level playing field, but if you've got vastly different resources within companies then effectively you get incum- bency domination by default." Although there are clear examples of members voting against the interests of their employers, Lockwood says it is difficult to tell if they are acting impartially. "The real- ity is unless you sit through each and every meeting it's hard to say. "If you think about this as a governance system, does Ofgem – which is really the responsible overseer – does it really know, does it have the capacity to know, whether or not that is the case?" he asks. "How is that actually enforced and what is the compli- ance mechanism? I don't think there actually is one." It is for this reason that Lockwood says responsibility for scrutinising code changes should be taken "out of the hands of compa- nies" and transferred to a public body; per- haps one separate from Ofgem that is more specialised towards the task. He says the inertia created by the dominance of incum- bents means we need to "completely end the self-regulation system". It may be true that panel members are acting impartially; making decisions entirely based on what's best for the energy system and giving no particular regard to the con- cerns of the companies that pay their wages. But without "searching their souls" it really is impossible to tell if this is the case. As the UK strives to build a smarter, more flexible energy system, the question is, are we willing to take it on faith? " "

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