Utility Week

Utility Week 3rd March 2017

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

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12 | 3rd - 9th March 2017 | UtILItY WEEK Policy & Regulation This week Multi-utility regulator mooted by Gemserv Water market opening presents opportunity for energy players but raises regulatory questions If trends towards multi-utility offerings gain momentum aer the opening of the non-domestic water market to competition, "it could raise fundamental questions about the creation of a multi-utility regulator", a leading utilities service provider has said. A research paper from Gem- serv said that water market opening presents "a clear opportunity for energy players" but warned that the introduction of multi-utility markets will bring regula- tory challenges. Gemserv, which also governs the energy market switching code, observed that different regulatory obli- gations and rules operated by Ofwat and Ofgem could cause difficulties. For instance, regulatory overlaps or gaps could lead to lapses in the provision of protection for customers who opt for bundled utility deals. "Particularly important challenges exist with regard to cost allocation, tariff regulation, financial accounting, and the application of residual price controls," Gemserv said. "Similar issues existed when the gas and electric- ity markets were separately regulated before alignment began with the creation of Ofgem." Gemserv also observed that it is more likely that multi-utility offerings will emerge through energy com- panies entering the water market than vice versa. This is because moves from the energy market into water are operationally "less demanding", requiring the set-up of fewer extra processes to provide customer-facing func- tions that already exist in energy companies. LV EnErgY Don't say green, say clean technology The government is set to rebadge its delayed emissions reduction plan (ERP) to focus on economic growth. The ERP will be renamed a "clean growth plan", according to backbench Conservative MP James Heappey. His revelation came at trade body Renewable UK's annual wave and tidal conference in London. Heappey said the renaming was part of a wider push by min- isters to refocus environmental policy on growth. He said: "Don't talk about the environment, talk about clean technology." He added that he understood publication of the plan, which is designed to set out how the UK will meet its post-2020 green- house gas reduction targets, had slipped from April to June. Heappey also said the plan was likely to give strong backing to offshore generation. EnErgY Energy market 'tilted against big suppliers' The energy retail market is "tilted" against larger suppliers because smaller rivals don't have to pick up the tab for govern- ment policies, Centrica's chief executive Iain Conn has said. The British Gas owner is also struggling to compete on price with many new entrants because they are gambling on wholesale prices to undercut its offers. "The playing field is tilted against us at the moment," said Conn. "If you have less than 250,000 customers, you don't have to pay all of the govern- ment levies and the warm homes discount as we're asked to do." Between 2009 and 2016, he said environmental and policy costs had more than doubled. EnErgY Nolan anticipates exodus from Npower Ofgem chief executive Dermot Nolan has told MPs he hopes Npower's bid to hike prices for its standard variable customers is not a "profitable strategy". Npower sparked outrage last month when it announced it was increasing its standard variable tariff rate by 9.8 per cent. Nolan was giving evidence to the business, energy and indus- trial strategy select committee's investigation into the Competi- tion and Markets Authority energy market review. On Npower's planned price hike, he said: "The hope would be that they can't frankly and then lose significant amounts of customers and the price rise is not profitable." He said that such an outcome would supply "some evidence" that competition in the energy market is working. Water: a challenge and an opportunity Political Agenda David Blackman "Government intervention in energy on the agenda" Energy was centre stage at last week's parliamentary by- elections. Fuelling Labour's loss in Copeland was the confusion over its energy stance as the party tried to distance itself from leader Jeremy Corbyn's historical opposition to nuclear power. The voters' verdict has firmed Labour's support for nuclear power. It has given Labour's trade union backers, which have large numbers of members employed in the nuclear sector, more leverage. As reported by Utility Week (above), he said the long- awaited Emissions Reduction Plan is set to be rebadged as a "clean growth plan". However, he also reminded delegates the government had committed itself "fairly early on" to the 5th carbon budget, which entails reducing emissions to 57 per cent of 1990 levels by 2032. The government hasn't com- pletely abandoned the environ- ment, but post-Brexit, creating jobs has a new urgency. But the Stoke Central by- election could also have implica- tions for the future direction of energy policy. Ukip leader Paul Nuttall failed to win the seat, but one of his stock responses is that the party would cut average energy bills by £300 a year by scrapping renewable subsidies. It will be tempting for prime minister Theresa May to squeeze Ukip even further into irrel- evance by doing the same. Tory MP James Heappey told a Renewable UK conference last week that Downing Street is "reticent" about what May's pre- decessor David Cameron dubbed the "green crap".

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