Utility Week

UTILITY WEEK | 17TH - 23RD NOVEMBER 2017 | 3 This week 4 | Seven days 7 Policy & Regulation 7 | News Five water companies fail on financial plans 8 | Chief executive's view Tony Smith, Consumer Council for Water 9| Analysis Centrica finds the going tough 10 | Analysis The Helm cost of energy review's ideas for generation 13 Finance & Investment 13 | News Half-year profits slide at National Grid 14 | Analysis The merger between the retail operations of SSE and Npower 16 Operations & Assets 16 | High viz Barn Energy's Knottingley scheme 18 | Insight report What utilities should be doing to tackle cyber security 21 | Market view The move to a distribution system operator model 22 | Market view Builders beware when it comes to big utility projects 25 Customers 25 | News Npower and Eon pilot SMETS2 smart meters 26 | Analysis The Clean Growth Strategy is a step in the right direction Markets & Trading 28 | Market view How to spot an upcoming triad 30 Community 31 | Disconnector GAS 9| Analysis Centrica finds the going tough 22 | Market view Builders beware when it comes to big utility projects WATER 7 | News Five water companies fail on financial plans 8 | Chief executive's view Tony Smith, Consumer Council for Water ELECTRICITY 13 | News Half-year profits slide at National Grid 16 | High viz Barn Energy's Knottingley scheme 21 | Market view The move to a distribution system operator model 28 | Market view How to spot an upcoming triad ENERGY 10 | Analysis The Helm cost of energy review's ideas for generation 14 | Analysis The merger between the retail operations of SSE and Npower 18 | Insight report What utilities should be doing to tackle cyber security Pitney Bowes: Make self service smarter and more engaging http://bit.ly/2nAa2rC CGI: Demand side flexibility in UK utilities http://bit.ly/2hrMapA Knowledge worth Keeping Visit the DownloaDs section of Utility week's website http://www.utilityweek.co.uk/ downloads Suppliers are at a Darwinian crossroads Energy suppliers are a dying breed. Already laid low by the heavy hand of retail price caps that threaten their profitability, now they have been told by the regulator that their role in the market may be heading for redundancy anyway. This week, Ofgem called for evidence on the need to reform the "supplier hub" model that places retailers at the centre of the energy market and gives them control of the customer relationship. The regulator is concerned that this long-standing arrangement may be blocking innovation in the energy market and unfairly allowing suppliers to retain a dominant position while peer-to-peer trading platforms and smart charging structures for electric vehicles (EVs) flounder. Good news for aspirant market disruptors. But a pretty bitter pill for some incumbents who must increasingly feel like dinosaurs unhappily watching the inexorable approach of a large asteroid. With margins diminishing, political interventionism growing and a horde of usurpers – keen to prove they can deliver a better, cleaner, faster, cheaper customer experience – gaining the ear of the regulator, it's clear that suppliers have reached a Darwinian crossroads. In a market that has maintained low barriers to entry for conventional supply entrants in recent years, it's inevitable that some will fail to evolve – or choose not to. Industry commentators have warned for some time that a rising penchant for government meddling in markets, combined with other disruptive forces, would cause a major exit from the supply market. And last week SSE and Innogy proved them right. While the companies have avoided confirming that the merger of their retail businesses is the prelude to a sell-off, the language around the deal has le City analysts in little doubt of the ultimate intention (see p15) – if a buyer can be found. Some suppliers, however, are more set on fight than flight in the face of the challenges bearing down on the energy market. Over the course of 2017, companies including British Gas, Ovo Energy and First Utility have made swi strides to transform themselves into home services providers rather than energy suppliers. They have splurged on acquisitions or technology developments that will give them footholds in EV charging, grid support services and connected home markets with supporting kit installation and maintenance offers. The strategies vary in the detail, but are united by an acknowl- edgment that vending kilowatt-hours is becoming a dead end more quickly than most expected. Jane Gray, Deputy editor, janegray@fav-house.com Leader Jane Gray

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