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Utility Week 16th June 2017

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8 | 16TH - 22ND JUNE 2017 | UTILITY WEEK Policy & Regulation Prohibiting networks from own- ing and operating storage will lead to higher bills for consum- ers, a senior figure at UK Power Networks (UKPN) has argued. Networks cannot always rely on the market to provide the storage services they require at the lowest cost, according to director of strategy and regula- tion, Suleman Alli. "DNOs [distribution network ELECTRICITY Barring network-owned storage will raise bills, says UKPN operators] have to have the least- cost technical options available to us – which includes storage – in order for us to deliver the reli- ability, the safety, and the better service that customers expect," Alli told Utility Week. Market tenders should "in theory" be able to provide the lowest-cost storage solutions because they will encourage competition and participants will be able to stack revenues from different services. However, Alli said in practice there will be some instances where this is not the case: "DNO services are likely to very specific and highly locational. It's a bold assump- tion to say that the best value for the market would always be where the DNO needs it and for the duration that the DNO needs it. This week Gove succeeds Leadsom at Defra Reshuffle maintains energy department status quo but results in a new environment secretary Prime minister Theresa May has delivered a cabinet reshuffle in the wake of last week's general election. The switch-about in senior departmental positions has brought former Conservative party leadership rival Michael Gove back to the front bench as secretary of state for environ- ment, food and rural affairs. Gove, who had a controversial run as education secretary when David Cameron was prime minister, ousts Andrea Leadsom, who also contested the Conservative party leadership following the Brexit refer- endum last year. Leadsom moves on to become Leader of the House of Commons. May's reshuffle was less extensive than some had anticipated in the run-up to last Thursday's election, which saw the Conservative party lose its parliamentary majority. Greg Clark, who was re-elected as MP for the constit- uency of Tunbridge Wells, was reappointed as secretary of state for the Department for Business, Energy and Industrial Strategy (BEIS). Clark had been tipped before the election for possible promotion to the role of chancellor of the exchequer. However, the day aer the election, May announced that five senior Cabinet ministers would retain their posi- tions, including incumbent chancellor Philip Hammond. Hammond reportedly demanded a bigger say over the government's Brexit negotiation strategy as a condition of staying on as chancellor. Pundits have said his successful insistence on this is a sign of May's weakened authority over the Cabinet following her failure to deliver an increased majority for the Conservative party. JG ENERGY Loss of confidence in value of competition Politicians have expressed a "collective loss of confidence in markets and competition to deliver the best outcome for consumers", KPMG's head of power and utilities has told Utility Week. Simon Virley, who was for- merly director for energy markets and infrastructure at the Depart- ment of Energy and Climate Change, also suggested that the enthusiasm shown for extend- ing competition into increasing aspects of the utilities industry in recent decades will his- torically be seen as an anomaly rather than an ongoing trend. Virley made his comments aer last week's shock general election result. Due to uncertainty over the make-up of the next govern- ment, Virley said he could not speculate on key policy concerns for utilities in the coming weeks and months. But he observed: "With both main parties promis- ing major state intervention in the energy market, there seems to have been a collective loss of confidence in markets and competition to deliver the best outcome for consumers." ENERGY Lord Turner tipped to lead cost review Former energy select commit- tee chair Tim Yeo has backed Lord Turner to head the review of energy costs pledged in the Conservatives' manifesto alongside the promise to cap householders' bills. Yeo, who stood down as a Conservative MP at the 2015 gen- eral election and was a shadow environment secretary when the Tories were in opposition, said Turner's appointment to chair the review would bolster busi- ness confidence in the exercise. "Adair Turner did a very effec- tive job at chairing the Climate Change Committee," said Yeo. "He has a good understanding of economics, gives very clear arguments and he looks at the evidence. He's not a Conserva- tive, but he has the confidence of the business world." ENERGY Carbon Trust seeks to speed up transformation The Carbon Trust has launched an initiative to unite the energy industry in overcoming key bar- riers to the transformation of the energy system. Partners in the Energy Systems Innovation Platform (ESIP) represent almost 50 per cent of the supply market in the UK. They include Centrica, Dong Energy, SSE and Scottish Power, companies that also own signifi- cant generation portfolios. ESIP will seek to address obstacles to investment such as regulation and long-term busi- ness models, using "rigorous and transparent analysis" to develop solutions. Leadsom: now Leader of the House of Commons "If the market can't provide the lowest-cost solution option we shouldn't be prevented from doing it ourselves." "Unbundling" rules currently prevent electricity networks from operating storage assets on a commercial basis. It was for this reason that UKPN recently out- sourced the commercial operation of its Leighton Buzzard facility to smart energy firm Limejump.

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