Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/867611
UTILITY WEEK | 1ST - 7TH SEPTEMBER 2017 | 11 Policy & Regulation This week Ofgem begins review of network charging Significant code review to address concerns that residual charges burden some network users Ofgem has begun a wide-ranging review of electricity network charging to address concerns that the current arrangements may unfairly burden some users and lead to inefficient outcomes. The significant code review (SCR) will examine the residual charges that recover the sunk costs of the existing distribution and transmission networks. Outlining the scope of the review in an open letter to stakeholders, energy systems partner Frances Warburton wrote that the current charging framework may result in "inefficient use of the networks" and drive behaviours that have "adverse impacts on other network users, and hence consumers in general", she said. "As a result of changes in technology and other factors, some network users are increasingly able to adjust the timing and volume of their production and/or consump- tion of electricity, reducing their exposure to charges. Therefore, current residual charges will increasingly fall on those network users who are not able to do this." The regulator will keep an eye on embedded benefits throughout the SCR: "If evidence emerges that these may be leading to significant distortions and consumer disbenefits, we will consider whether action, ahead of the conclusion of the SCR, would be in consumers' interests." Ofgem plans to publish a working paper on residual charges before the end of this year and then a dra impact assessment for any proposed charging arrangements in the second quarter of 2018. The decision on the proposed changes would be made in the following quarter. TG ENERGY Irish market is a post-Brexit priority The government has identified energy as a priority issue in the upcoming negotiations about the UK's post-Brexit relationship with the Republic of Ireland. The government states that "specific, early, consideration" must be given to the single energy market (SEM), which cov- ers the whole island of Ireland, in a position paper published by the Department for Exiting the Euro- pean Union (Dexeu) last week. The SEM has allowed electric- ity generators to compete in a unified wholesale market across the island of Ireland since 2007. In its position paper, Dexeu says any post-Brexit framework should "facilitate the con- tinuation" of the SEM, which it describes as "by far the best option for the electricity market in Northern Ireland" given the size and isolation of the province. ELECTRICITY Penalties for DNOs' sub-par connections Ofgem has warned distribution network operators (DNOs) they are likely to face penalties of around £13.9 million for failing to provide satisfactory connec- tion services. Based on customer feedback, the regulator said all six DNOs have fallen short of expectations and could see their revenues reduced via an incentive mecha- nism within the RIIO framework. Ofgem raised the prospect of penalties aer consulting with customers in June and July. A further consultation has been launched to enable stakeholders and DNOs to provide additional evidence. The deadline for responses is 18 September. WATER Ofwat 'missing opportunity' in PR19 Ofwat has been accused of miss- ing an opportunity to address issues around competition in connections in PR19. Fair Water Connections (FWC), which represents self-lay provid- ers, maintains competition in connections is being constrained by water company behaviour, particularly in southern England. It is calling on Ofwat to rethink the structure of D-MeX, a devel- oper services experience incentive that will be introduced in PR19. Aimed at stimulating firms to improve their performance to cus- tomers wanting new connections, it would be paid on surveyed customer satisfaction "rather than quantifiable delivery perfor- mance", says FWC. But managing coordinator Martyn Speight said: "The proposals need to be beefed up and rewards only given where new guaranteed standard targets and associated compensation payments are met." Taking steps: SCR will examine residual charges Political Agenda David Blackman "The delayed clean growth plan could be out soon" It will be back to school for MPs next week as the House of Com- mons summer recess ends. And the upcoming Parlia- mentary session is expected to see movement on energy policy, with the landmark event set to be Professor Dieter Helm's costs review, which is due to be sub- mitted by the end of October. Of more immediate interest though is the much-delayed clean growth plan, which could be out in the next two weeks. Following her appointment And publishing the plan sooner rather than later would fit with the government's desire, evident since the appointment of No 10's new director of commu- nications Robbie Gibb, to seize control of the political agenda. Perry has tried to justify the delay by claiming the plan, which will map out how the government will meet the carbon reduction targets outlined in the fih carbon budget, will be "ambitious". Utilities will just hope the wait has been worth it. as climate change minister in the post-election reshuffle, Claire Perry said the document, formerly known as the emissions reduction plan, would not be published until aer the recess. News of the delay sparked disgruntlement, given that her predecessor Nick Hurd indicated in April it was nearly ready. The smoke signals from Whitehall suggest the plan is finally nearing completion. Utility Week understands that it is currently being circulated by the Department for Business, Energy and Industrial Strategy around other ministries for com- ments, which is generally the final stage prior to publication.