Utility Week

Utility Week 3rd March 2017

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16 | 3rd - 9th March 2017 | UtILItY WEEK Finance & Investment This week DNOs underspend on network management customers set to reap rewards as network operators spend 9 per cent less than allowance UK distribution network opera- tors (DNOs) spent a collective £3.2 billion managing their networks during the first year of their price control, according to a report from Ofgem. The RIIO-ED1 annual report showed that this spend was 9 per cent less than the allow- ance set for the year. Overall, for the whole of the eight-year price control period, DNOs were allocated a collective £26 billion for network management. They are now forecasting a spend of £25 billion – 3 per cent less than budgeted. Under the rules of RIIO, DNOs are obliged to share the remainder from underspent allowances with customers. Ofgem said it would continue to analyse how under- spends in allowances are being achieved. For example, it will look into whether savings come "through efficiencies and innovation or non-delivery of work". It said it was too early to draw conclusions but, "when we do, this will inform our assessment for RIIO-ED2". Across all DNOs, the number of supply interruptions and the length of time customers were off supply fell in 2015/16 – by 9 per cent and 12 per cent respectively. The time taken to connect new customers to the distribution network also declined in 2015/16. Financially, DNOs have fared well in the first year of RIIO-ED1 and Ofgem estimates that the average return on regulated equity for the period will be 9.03 per cent. This outlook provoked criticism from consumer body Citizens Advice, which said such revenues are "huge" for any regulated monopoly business. JG EnErgY Centrica venture to support innovation Centrica is to launch a venture that will "identify, incubate and accelerate" fresh technologies and innovations. Called Centrica Innovations, it will invest up to £100 million over the next five years in fledg- ling firms developing new prod- ucts and services for customers. The enterprise will be headed by Charles Cameron, Centrica's group director of technology and engineering, and will deploy scouts to key technology hubs in London, Cambridge, Seattle, Houston and Tel Aviv. Centrica Innovations will act as an "incubator" for start- ups not yet mature enough for investment, supporting them with expertise, mentoring or product piloting, for example. It will also help companies in the Centrica group, such as data services firm Io-Tahoe. Ignite, Centrica's £10 million social entrepreneurship fund, will be brought into the new venture. EnErgY Drax bids to buy US biomass pellet firms Drax Group has entered bids to buy two bankrupt biomass pellet plants in the US. The purchases would help the company meet its target to self-supply 20 to 30 per cent of the compressed wood pellets it burns at its Yorkshire plant. Drax has submitted initial cash bids for the operating assets of Texas Pellets and Loui- siana Pellets, both of which are going through the "Chapter 11" bankruptcy process. Although the bids are bind- ing and could be accepted by the sellers, it is expected that the successful buyer will be deter- mined through auctions due to be held on 1 and 2 March. ELEctrIcItY EU cash boost for North Connect link The EU has awarded €10 million to a proposed interconnector between Scotland and Norway. The cash will come from the Connecting Europe Facility – the EU's support scheme for infra- structure investments. The 1.4GW North Connect link will run for over 400 miles between Peterhead in Scotland and Simadalen in Norway. The subsea cable is sched- uled to start operating in 2022 and will join the UK with Nor- way's south-west region, which contains 90 per cent of the coun- try's hydropower plants. Excess UK wind power will be exported to Norway to refill pumped hydropower storage reservoirs. The project is being devel- oped by Norwegian companies Agder Energi, E-CO and Lyse, and Swedish company Vattenfall AB. DNOs: supply interruptions down Stock watch 240 240 235 235 230 230 225 225 220 220 CentriCa share priCe, one week 23 Feb 7 Feb 24 Feb 14 Feb 27 Feb 21 Feb 28 Feb 28 Feb CentriCa share priCe, one monthp Centrica may have reported a 4 per cent rise in adjusted operating profits in 2016, but stock market investors were clearly expecting better. Shares in the British Gas owner dropped by almost 4 per cent from 233 pence per share to 225 pence per share in the opening hours of trading following the release of its financial results last Thursday. They remained around that level at the time of going to press.

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