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UTILITY Week 7th July 2017

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14 | 7TH - 13TH JULY 2017 | UTILITY WEEK Policy & Regulation This week Ofgem 'has no power to enforce price cap' Former regulator says government cannot pass the buck for its manifesto commitment to Ofgem Former energy regulator Stephen Littlechild has slammed energy secretary Greg Clark's assertion that Ofgem has the power to fix market failings by imposing price regulation on suppliers. Last week, in response to opposition questions about his commitment to deliver the "safeguard tariff " pledged in the Conservative party manifesto, Clark insisted he stood by the promise. He added that consumer detriment in the energy market should be "put to an end as soon as possible, rather than waiting for legislation to pass through the House. Ofgem has those powers and I believe it should use them". Responding to the statement, Littlechild said the energy secretary was wrong. "Ofgem can propose a tariff cap, but a supplier may decline to accept," he explained. "In that case, Ofgem can ask the CMA [Competition and Markets Authority] to give it the power to impose a cap. However, the CMA has already given its view. It has considered and explicitly rejected a tariff cap." Littlechild concluded: "There are things that Ofgem could do, or undo, to address present concerns. But it is questionable whether imposing a tariff cap is one of them." Littlechild – who was director general for electricity supply from 1989 to 1998 – has become an outspoken opponent of government intervention in the energy market, and particularly of proposals for energy retail price caps. JG ENERGY Switch to SMETS2 work 'unambitious' Ofgem has expressed concern that some suppliers are being "unambitious" in their prepa- rations for the switchover to SMETS2 smart meters. In a letter to the industry, the regulator's head of smarter meter- ing, Jacqui Russell, reviewed progress on the national smart meter rollout, as well as supplier plans for the rest of 2017. In a section addressing the adoption of SMETS2 meters, rather than the earlier SMETS1 meters that have limited smart functionality, Russell said Ofgem expects suppliers to "be actively engaged in end-to-end testing [of SMETS2 meters]". She also said they should "be actively manag- ing issues arising from end-to- end testing… to enable initial SMETS2 installations to com- mence at the earliest opportunity; and have robust and deliverable plans in place to complete their SMETS1 to SMETS2 transition by the SMETS1 end date". But Russell added: "We are concerned that some suppliers have apparently unambitious approaches to these preparations." ELECTRICITY Parliament may rebel on Euratom Parliament will force Theresa May to shi her position on withdrawal from Euratom unless she concedes on the issue, David Davis's former chief of staff has warned. James Chapman, who worked for the secretary of state for exiting the EU until the general election, said the UK was exiting the cross-continental nuclear co- operation body due to the prime minister's "absolutist" resist- ance to the UK remaining under the jurisdiction of the European Court of Justice. In an interview with Radio 4's Week in Westminster, in which he was probed on whether the cabinet would be cheered by a change of heart on the issue from May, Chapman said: "I think they would be and if she doesn't shi on Euratom I think parliament will shi it for her." ENVIRONMENT Stall in carbon emissions reduction Efforts to tackle carbon emissions from buildings have stalled, according to an energy thinktank. The accusation by E3G follows the publication of a report by gov- ernment climate change advisers showing insulation rates have plunged by 90 per cent since 2012. Responding to the annual pro- gress report by the Committee on Climate Change, E3G highlighted figures showing that carbon emis- sions from buildings have risen for the second year to 89MtCO2e, or a 2 per cent increase. Littlechild: the energy secretary is wrong Political Agenda David Blackman "It is unsurprising that Clark tried to bypass parliament" One thing that the government is determined to avoid over the next couple of years will be votes in parliament. This was evident from the Queen's Speech, which outlined Theresa May's threadbare legis- lative programme until 2019. The House of Commons will all be about Brexit as it navigates the massive amount of legisla- tion that will be required to secure the UK's exit from the EU. In this context, it is probably unsurprising that Greg Clark From the industry's perspec- tive, it's broadly sensible, but has gone down less well in parliament, where an embold- ened Labour party called it a "betrayal" of consumers. And given the Commons arithmetic, it will be difficult for May's weakened government to resist pressure to legislate. Therefore a window of opportunity lies open for energy companies to deter- mine their own fate in Ofgem's consultation. tried to bypass parliament by asking Ofgem chief executive Dermot Nolan to deliver the government's energy price cap manifesto promise. However, if Clark had consulted Nolan's predecessor Stephen Littlechild (see story, above), he would have found the regulator lacks the powers to execute the kind of broad-brush price cap outlined by the Tories before the election. Barely a week-and-a-half aer Clark's letter had arrived in his inbox, Nolan published a package this week combining protection for those vulnerable customers not on prepayment meters with further measures to promote competition.

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