Utility Week

UTILITY Week 17th March 2017

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UTILITY WEEK | 17TH - 23RD MARCH 2017 | 19 Policy & Regulation I n terms of energy and invest- ment in infrastructure, it was perhaps a quieter Budget. The long-awaited carbon floor price post-2020 was once more paused upon. Industry needs greater clarity about the long- term direction of the carbon floor price, but we do recognise this might be difficult to provide with the UK's membership of the EU Emissions Trading System post-Brexit unclear. It was also announced the Levy Control Framework (LCF) will be replaced. Energy UK called for these reforms ahead of the Budget and it is therefore positive to see the Treasury taking these views on board by reviewing other mechanisms to manage Budgets for low-carbon spending in the future. In any future reform, three main objec- tives should be considered for what is vital future low-carbon investment. The first is to provide long-term transparency regarding the cost of low-carbon generation schemes. The second is to encourage investment by providing future visibility of the government's investment commitment for new low-carbon generation, including both mature and innovative tech- nologies. Finally, it is essential to understand what the total cost of the schemes will be to consumers. Additionally, the spring Budget gave us an indication of the consumer green paper, and while we eagerly await its contents, improvement and pro- gress is being made in the right direction. A healthy market has a number of clear indicators. Switching figures have risen year on year for the past three years and it is fantastic to see the latest figures for February rise to 415,599 – and indications are that internal switching is seeing twice the number of customers make a change with their existing supplier. Conversely, we have seen complaints go in the opposite direction, falling year on year as companies are striving and com- peting on customer service, with the latest 2016 figures showing around 3.5 million complaints. Suppliers are more than aware they need to be proactive in communicating tariff information to all customers. They are continuing to trial the best ways in which to engage and will drive and implement the Competition and Markets Authority's remedies. Retailers are constantly looking at ways to differentiate themselves and appeal to new customers, through service inno- vations and product launches. There are now more than 50 suppliers active in the market, so the choice for consumers is there and we are determined to make it as easy as possible. However, it must be made clear that this is in no way a sign of complacency. There is lots of work to be done by all and working together – from the trade association to the govern- ment to the wider public – is the best solution for all consumers. The industry is committed to ensuring the market works for all, particularly low-income or vulnerable customers. The industry spent £320 million on help for these consumers in 2016 and launched new prepayment principles to provide improved safeguards for prepay custom- ers. These principles, coupled with the rollout of smart meters, will improve the experience of prepay customers and give cus- tomers more control over their energy usage and bills, allowing them to save both energy and money. Chief executive's view Lawrence Slade, Energy UK south of England, the government has announced various rebates. It is still not totally clear whether utilities based there, such as Southern Water, will derive any benefits from the many adjustments. Undoubtedly though, soaring business rates are adversely impacting the potential of many renewable projects, notably hydro and solar power. While tax cuts were not a central feature of the spring Budget, Hammond did reaffirm that the base rate of corporation tax, cur- rently 19 per cent, would fall to 17 per cent by 2020. Furthermore, there were no major cor- poration tax changes to current capital allowances and the deductibility of interest costs; these factors have markedly reduced the annual tax yield from many water companies. More generally, the latest data from the Office for Budget Responsibility (OBR) showed that the enormous public sector net borrowing figure is forecast to increase in 2017/18 from the latest projection for 2016/17 of almost £51.7 billion. With global interest rates, led by the US, now set to rise, the UK may find it more dif- ficult than previously to fund its public debt. Higher interest rates would drive that fig- ure higher. They would also present highly geared utilities with a greater financing chal- lenge than they have faced for some years. Nigel Hawkins, director, Nigel Hawkins "It's welcome that the economy is growing faster than expected this year. Welcome too is the focus on investment and on skills, where the introduction of T-levels for technical qualifications will help turn the tap on our talent pipeline in core water and waste businesses." Chris Loughlin, chief executive, Pennon 2021/22 when the new controls, to replace the LCF, will come into force £270m the amount the Treasury will invest in 2017/18 to "kick-start" the development of disruptive technologies £250m the investment over the next four years to "build the pipeline of high-skilled research talent necessary for a growing and innovative economy" £90m will be used to provide an additional 1,000 PhD places – 85 per cent of them in science, technology, engineering and maths (STEM) disciplines £160m will be used to support new fellowships for early and mid-career researchers 16 to 19 the age of students who will take the new T-level qualification £500m the annual funding available to support the new T-level qualifications 17% ➡ corporation tax will fall to 17 per cent in 2020 Industry needs clarity about the direction of the carbon floor price

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