Utility Week

UTILITY Week 9th June 2017

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UTILITY WEEK | 9TH - 15TH JUNE 2017 | 11 Policy & Regulation This week Call for delay of cuts to embedded benefits Decision 'should not be made in the immediate aftermath of a general election', says group Ofgem has been pushed to delay its final decision on embedded benefits because of the political uncertainty created by the general election. The Flexible Generation Group, which represents peaking plant developers, said it would be inappropriate for the regulator to make the "highly contentious" decision when "public attention is elsewhere" and the future direction of the energy industry is in doubt. "A decision of this magnitude, which has such far- reaching consequences for how energy charges are levied and how competition in the market is developed, should not be made in the immediate aermath of a general election," wrote the group's chairman Mark Draper, in a letter to Ofgem chief executive Dermot Nolan. "It is our belief that no decision should be taken before Ofgem has time to discuss with the new administration the impacts of the policy on wider energy objectives." In March, Ofgem revealed plans to slash the residual element of triad avoidance payments – one of a range of benefits available to generation embedded within distri- bution networks – from about £45/kW to less than £2/ kW. The minded-to decision followed a year-long review. The changes have been criticised by peaking plant developers. UK Power Reserve accused the "mafia-like" Connection and Use of System Code (CUSC) panel, which recommended the reforms to Ofgem, of skewing decisions in favour of incumbents. Ofgem is due to make a final decision on 15 June, but Draper said proceeding as planned could be viewed as "a deliberate attempt by Ofgem to present the new administration with a decision before assessing it against the broader policy background". TG WATER Expert knowledge 'must be retained' Water customers in the non- household retail market must be allowed to have direct access to the "expert knowledge" held within wholesale businesses, Wessex Water has insisted. "There are a lot of things that wholesalers did well for custom- ers before market opening," the company's head of wholesale customer services, Ryan Davies, told Utility Week's sister title Water.Retail. "In particular, man- aging emergency events such as loss of supply, water quality events or sewage flooding," he said. "Expert knowledge on these is still held within whole- sale businesses and customers having direct access to it and other information is important." He said wider than this, it is "critical" customers "continue to have an effortless service". Although the retailer ulti- mately holds the contract with a customer, a wholesaler will "always be closely invested in the relationship", as its core products need to meet high regu- latory standards, Davies added. HEAT CMA urged to delve into district heating Citizens Advice has petitioned the Competition and Markets Authority (CMA) to investigate the district heating sector due a "lack of choice and control" for consumers. The charity says it has "con- siderable concern" over the bal- ance of power between suppliers – which face no competition as "unregulated" natural monopo- lies – and consumers, who risk being overcharged as a result. "Unlike the gas and electric- ity sectors, the delivery of heat to homes is not regulated," Citizens Advice states in a new report. "People receiving heat in that way do not receive the same pro- tections as those heating homes using individual gas boilers or electricity." Heat networks are currently experiencing a "renaissance", according to the study, with 2,000 already operating in the UK and 150 in the pipeline. Citizens Advice says contacts to its consumer helpline relating to heat suppliers have risen over the past year, but it can only offer limited help due to the absence of sector-specific regulations. It says the problem is likely to become worse as the number of heat networks grows. The report places a number of problems in the spotlight, including: the calculation and availability of tariffs, which vary widely from supplier to supplier; the lack of choice over meter type; the length of contracts, which in some instances last for more than two decades; and the inability to disconnect without incurring charges. With "no indication" that the government plans to introduce statutory regulation in the near future, it has therefore urged the CMA to step in and investigate. Peaking plant developers want delay of decision Energy industry participants must move away from "always expecting the best and getting the worst" and start "expecting the worst and hoping for the best" former Conservative MP Laura Sandys has told Utility Week. Sandys, who acted as par- liamentary private secretary to Greg Barker while he was energy minister, added that industry responses to the Conservative ENERGY Industry must start to 'expect the worst' and act with 'courage' manifesto pledge to cap energy prices show leaders are "over- interpreting" its wording. Following the manifesto's publication, some commentators concluded that a commitment to "maintain the competitive element of the retail energy mar- ket" while extending protections to vulnerable customers might practically mean the reach of a Tory price cap would be limited. But Sandys observed: "If you look at all the Facebook advertis- ing they are doing, all the Twitter advertising that government's doing, they are banging on about this price cap. They will have to deliver on it." She added that industry spokespeople who argue that intervention in the energy market is not required because the market is competitive need to think again. "The sector think they are super-competitive, but actually what they mean is, there are lots of competitors. They are talking a numbers game rather than a market game." Sandys – who now runs consultancy Challenging Ideas – said this is an important distinc- tion because "the manifesto, and certainly the prime minister, are not about competition being an end in itself ".

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