Utility Week

UTILITY Week 8th September 2017

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4 | 8TH - 14TH SEPTEMBER 2017 | UTILITY WEEK Smart meter rollout gathering pace Domestic smart meter installations by large suppliers are gathering pace. Figures from the Department for Business, Energy and Industrial Strategy for Q2 2017 show: 1.058m Smart meters installed in the three months to the end of June. 460,000 Number of smart gas meters installed. 598,000 Number of electricity smart meters installed. 3% The Q2 install rate rose 3 per cent compared with Q1. 6.66m Total number of domestic smart meters installed by large suppliers, representing 14 per cent of their household customer base. STORY BY NUMBERS Seven days... National media Scots windfarm could 'poison the landscape' Britain's largest private landowner risks flooding waterways with poi- sonous lead if plans to build a huge windfarm go ahead, residents have warned. The Duke of Buccleuch's proposed windfarm in southwest Scotland is facing fierce opposition from local residents and politicians across the political divide. Erecting 35 wind turbines on the hillsides between Sanquhar and Wanlockhead in Dumfries and Gal- loway will wreck the landscape, risk unearthing contamination from old lead mines and undermine plans for a community land buyout, they say. The Telegraph, 3 September Price cap proposal 'vulnerable to fraud' Energy firms fear that plans to set a price cap for at least two million poorer households could lead to widespread fraud unless the government agrees to share infor- mation to help identify vulnerable customers. Regulator Ofgem is expected to unveil plans for a price cap later this month to come into force in January. This would be a more modest proposal than Theresa May's pre- election promise to cut the price of energy by £100 for 17 million households. The Mail on Sunday, 2 September Hydrogen future for UK as infrastructure Ministers are expected to reignite plans for a £50 billion hydrogen overhaul of the country's gas grid to help strip harmful carbon emissions from the energy system. Within weeks the government will publish a long-delayed strategy to clean up emissions from heat, transport and industrial sectors in a multi-billion pound energy evolution as radical as the power sector's move from fossil fuels to renewables. The Telegraph, 2 September Ofwat got its sums wrong on PR19, says KPMG O fwat got its sums wrong on PR19, according to a report commissioned by three water companies that challenges the financial assump- tions underlying the regulator's proposed framework for the next price review. The report, by consultancy KPMG for Anglian Water, Northumbrian Water and Affin- ity Water, says the calculation Ofwat used for total market return (TMR), a key element of the cost of equity, is flawed. The report, which will form part of the three companies' response to Ofwat's price review consultation, suggests the sec- tor will not accept plans to cut investor returns in the next price review without a fight. In the report, KPMG takes issue with a number of the assumptions underlying the calculations of TMR made by PwC, a rival consultancy that advised Ofwat. It says the PR19 consultation "signals a possible fundamental change to the approach that Ofwat as well as other regulators have previously employed" in calculating TMR. PwC's estimated nominal TMR for PR19 is 8.0-8.5 per cent, which equates to 5.1 per cent to 5.5 per cent real. KPMG says this "is a significant reduction from UK regulatory precedent of 6.1-7.3 per cent, based on 100 years-plus of data". KPMG's analysis, which is based on long-run averages, puts TMR at 6.25-7.3 per cent. KPMG goes on to say that, even using short-term market data, "a correction for the shortcomings in PwC's analysis" results in a real TMR of approxi- mately 6.5 per cent. The report says: "The esti- mates appear to place no weight on historical outturn equity returns, achieved by inves- tors over the long run, or take account of the limitations and uncertainties associated with these estimates." In its consultation document, Ofwat argues that the current low interest rate environment is likely to persist, lowering the cost of equity for 2020-25. An Ofwat spokesperson said: "We commissioned the PWC report to support our consulta- tion on the PR19 methodology. We will be carefully considering all the submissions we have received ahead of the publica- tion of our final methodology in December." EB "Companies, to do well, would have to improve their service quality to developers." Ofwat's Jon Ashley pledges D-MeX will make a difference. See analysis, p10

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