Utility Week

UTILITY WEEK | 13TH - 19TH APRIL 2018 | 7 Policy & Regulation This week Ofwat sets out reform plans to rebuild trust Chairman Jonson Cox sets out the water regula- tor's agenda to improve corporate behaviours Ofwat's chairman Jonson Cox has set out a programme of reform to bring the water sector "back in balance" and rebuild public trust. Cox has written to environ- ment secretary Michael Gove to set out the regulator's agenda to improve corporate behaviours. It comes in response to Gove's signal earlier this year of a crackdown on execu- tive pay and offshore financial arrangements to address the "concerning" behaviour of water companies. Ofwat plans to: reform company licences; address concerns around executive pay; increase transparency on dividends and profits; ensure companies are financially resilient; and encourage companies to share financial outperformance, from additional gearing, with customers. Cox said: "Some water companies appear to be focused too much on financial engineering at the expense of public service. Alongside this, we've seen significant service failures, most recently following last month's cold snap and quick thaw, which led to tens of thousands of customers being le without water. "All of these things have damaged trust in water. Ofwat has been pushing water companies to up their game for some time; but we need to go further, faster." He added: "We have set out an agenda of reform to bring the water sector back in balance, including getting back to a proper sense of public service provided under private ownership." Over the next six months, Ofwat said it would take forward several formal consultations "to get to the posi- tion where it can implement the initiatives outlined". KP ENERGY Paper proposes Eco threshold is lowered The government is considering lowering the threshold at which companies must operate the Energy Company Obligation (Eco) scheme. The proposal to take a fresh look at the 250,000-customer threshold, above which compa- nies are obliged to participate in the energy efficiency scheme, is contained in a consultation paper outlining government thinking on the next phase of Eco. The document, published on 30 March, says the arguments are "balanced" on whether to extend the scheme beyond the 15 companies currently covered. It says that with the recent influx of new suppliers, "some of the original justifications for retaining the current customer number threshold no longer apply", with smaller companies able to avoid costs shouldered by their larger competitors. However, the paper also says figures that show 93 per cent of the market is accounted for by Eco-participating companies indicate "the threshold may not distort competition". ENERGY Scottish firm likely to face 'challenges' A Scottish public-owned energy company may face "challenges" competing with established players in the relatively low- margin supply market, accord- ing to a report commissioned by the Holyrood government. First minister Nicola Sturgeon announced last September that the Scottish government would explore setting up a new pub- licly owned company to provide low-cost renewable energy. However, a study outlining a strategic case for the company, carried out by consultancy EY for the Scottish government, warns it would not be eligible for subsi- dies under EU state aid rules. ENVIRONMENT Call for 'net zero' emissions target The government should publish a target by 2020 for achieving "net zero" emissions, according to a new report. The report, 10 Years of the UK Climate Change Act, published on 30 March by the Grantham Research Institute at the London School of Economics, says the target to cut emissions to 80 per cent of 1990 levels by 2050 is "technically consistent" with the Paris Agreement. But to ensure the UK is able to meet the agreement's objec- tive of keeping temperature rises "well below" 2C, the report pro- poses the government should go further and set a supplementary zero emissions target that would also cover the period aer 2050. Cox: wants to bring sector 'back in balance' Political Agenda David Blackman Brexit has certainly slipped down the news agenda over the past few weeks. For probably the longest period since 2016's referendum, the airwaves haven't been domi- nated by the UK's withdrawal from the EU. You don't have to buy Russian conspiracy theories, which paint last month's nerve agent attack as a cynical UK gov- ernment ploy to divert attention away from Brexit, to see that the focus of public debate has shied since it took place. Energy UK since the referendum. The CBI amplifies the industry body's argument that it is vital to maintain as much regulatory alignment as possible between the EU and the UK in areas such as the internal energy market, the Emissions Trading System and nuclear safeguarding. Utilities will hope the busi- ness body succeeds in winning over the government to the idea of a so Brexit for energy before the wider withdrawal agreement is cast in stone. This is also partly due to domestic politics. Theresa May has succeeded in papering over the cracks – at least for now – within the Tory party following her Mansion House speech in February. There is also a meas- ure of Brexit fatigue and the technical nature of this stage of the withdrawal negotiations. In a bid to restore Brexit back to the heart of the national debate, the CBI published a heavyweight paper this week outlining what a future EU-UK relationship should look like in key sectors of the economy, including energy. The business umbrella body's positions echo those adopted by "The CBI outlines how the EU- UK relationship should look"

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