Utility Week

6 | 26TH JANUARY - 1ST FEBRUARY 2018 | UTILITY WEEK Policy & Regulation This week Hinkley connection model under attack Ofgem says 'competition proxy' model will mean savings for consumers on transmission project National Grid has attacked Ofgem over its plans for fund- ing the connection of Hinkley Point C to the power grid. Ofgem published a minded- to decision declaring that the £800 million connection project should be financed using the new "competition proxy" model rather than under the standard RIIO2 regulatory price control. National Grid's share price fell 2 per cent immediately aer the announcement although it largely recovered by end of the trading session. The company has suggested it may fight the proposals, which it argues offer insuf- ficient returns on investment. Under the "competition proxy" model, National Grid would carry out the project but Ofgem would set allow- able revenue as though it had been procured through a competitive tender. This would be partly based on Ofgem's experience in tendering for the ownership for transmission links to offshore windfarms under the offshore transmission owners (Oo) regime, which it claims has saved consum- ers at least £700 million since its introduction in 2009. Ofgem said funding Hinkley Seabank using the competition proxy model would save consumers £100 million compared with the RIIO T-1 price control, primar- ily due to lower financing costs. In a statement, National Grid said it was "very disap- pointed with the proxy competition proposal which includes financial parameters proposed for the delivery of this complex and major infrastructure project". TG EMISSIONS Clean growth plan 'well short' of targets The government's clean growth strategy falls "well short" of achieving the kind of emissions reductions needed to meet statutory targets due to kick in five years from now, Parliament's climate change watchdog has warned. The Commons Committee on Climate Change's assessment of the clean growth strategy said it contains a "welcome recognition" of the challenge but that its proposals are "not yet firm enough" and will "fall well short of meeting the targets outlined in the fourth and fih carbon budgets", which cover from 2023 to 2033. The report recommended more encouragement for onshore wind and solar generation and called on government to set out plans in 2018 to kick-start a UK carbon capture and storage industry. WATER Ofwat to pilot C-MeX and D-MeX this year Ofwat has revealed it will "soon" be designing pilots for its new incentive metrics, the Customer Measure of Experience (C-MeX) and the Developer Services Measure of Experience (D-MeX). John Russell, Ofwat's senior director of strategy and policy, told delegates at Utility Week's Water Customer Conference in Birmingham that the regulator would be designing pilots and "running them later this year" to ensure the measures, which will be introduced as part of PR19, are "sufficiently robust" for use as financial incentive mechanisms before 2020. He added: "C-MeX will link financial incentives to the performance level of the best performing companies in all sectors. This will prove especially impactful because we know that customers don't compare their water services with those provided by other water companies." ENERGY Ofgem facing price cap shake-up In her first public appearance as energy minister, Claire Perry has warned that Ofgem faces a shake-up aer the introduction of the energy price cap. During a grilling by the Commons Committee on Business, Energy and Industrial Strategy, Perry said: "The regulator has to be much more interested in the competitive behaviour of its market and pay attention to green tariffs." She also said the cap might be lied before 2023, the final cut-off date outlined in the legislation, if the industry has cleaned up its act before then. New funding model for transmission upgrades Political Agenda David Blackman "State ownership doesn't lead to lower bills" It will be an unwelcome notion for the business and government titans gathering at the Davos World Economic Forum, but socialism is back in vogue. A survey by polling company Com Res showed that far more 18 to 24-year-olds identified the "most dangerous" threat facing the world today as big business (24 per cent) rather than communism (9 per cent). And scepticism about big business will have been given rocket boosters by the collapse countries, state ownership doesn't lead to lower bills for consumers, declares the CPS. As the body that developed much of the thinking that underpinned the Thatcherite privatisations of the 1980s, the CPS has skin in the game. But with the public purse, under pressure in areas like the NHS, voters at the next general election can be expected to take a cold, hard look at whether feelgood public ownership notions make economic sense. of Carillion. The construction giant managed a big chunk of the British public sector via a host of outsourcing contracts, many procured through the private finance initiative. It was brave timing therefore for the Centre for Policy Studies (CPS) to publish a report decrying Labour's nationalisation plans. According to the thinktank, bringing the energy suppliers and networks back into public ownership would account for the lion's share of the £306 billion price tag it puts on nationalisation. With little difference between energy bills in privatised Britain and state-owned European

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