Utility Week

UTILITY WEEK | 27TH APRIL - 3RD MAY 2018 | 11 UTILITY WEEK | 27TH APRIL - 3RD MAY 2018 | 11 Policy & Regulation This week Gove hails Ofwat's reform proposals Environment secretary expects water companies to co-operate 'fully and promptly' with regulator Environment secretary Michael Gove has welcomed Ofwat's proposed measures to "address concerns" about financial prac- tices in some water companies. In a letter to Ofwat chair- man Jonson Cox, Gove wrote: "I am fully supportive of all your proposals and agree that water companies should share with customers any additional returns above and beyond the financing costs assumed by Ofwat." Ofwat plans to reform company licences; address con- cerns about executive pay; increase transparency around dividends and profits; ensure companies are financially resilient and encourage companies to share financial outperformance from additional gearing with customers. Gove praised the regulator for its "continued efforts" to improve transparency in the water sector, particularly on dividend policies and executive pay. Gove also hinted he wants to see privately owned water companies publish the ratio of chief executive pay to the pay of their average workforce. The government is introducing legislation that will require quoted compa- nies to publish this information. Gove said he hopes Ofwat will be able to implement its proposals "in full without the need for government intervention or legislation" aer water companies in England said they are "fully on board" with the reforms. He said the government is ready to "revisit" how it can give Ofwat stronger powers to amend licences, including legislation, if the regulator finds water companies are "not fully and promptly" co-operating with its proposals. KP ENERGY Ofgem's thoughts on price cap published Ofgem has released its final working papers for the proposed price cap. The fourth paper tackles environmental and social obligations costs, and the fih seeks views and evidence on the updated competitive reference price approach to setting the initial level of the default cap. The series of papers follows the government's proposed price cap legislation, which was presented to parliament in February. A temporary price cap will be introduced for customers on standard variable tariffs and default tariffs, and there will be a new statutory role for Ofgem to deliver this measure. It will be Ofgem's responsibility to design and implement the price cap. Ofgem is inviting comments on the issues raised throughout the series, which should be submitted by 3 May. ENERGY Legal challenge to coal mine rejection The government's rejection of plans for an open cast coal mine at Highthorn, Northumberland, faces a High Court challenge amid accusations by the project's backers that the move will push up energy prices by increasing the UK's dependence on overseas fuel supplies. Banks Mining will challenge the decision by communities and local government secretary Sajid Javid to reject its plans. Javid ruled that the scheme could undermine the UK's efforts to meet its statutory climate change targets. Banks is lodging a challenge on the grounds that Javid has departed from guidance in the National Planning Policy Frame- work, which states that mining applications can be allowed if their benefits outweigh likely environmental impacts. WATER Green laws may be diluted after Brexit Key EU-inspired energy efficiency and water protections could be watered down in the courts if they are not fully incorporated into UK law, peers have warned. During a House of Lords debate on the EU withdrawal bill, Lord Deben, chair of the Committee on Climate Change, tabled an amendment to the bill giving parliament a say over protecting environmental and other safeguards enshrined in EU directives. Backing the former Conserva- tive environment secretary's amendment, Labour peer Baron- ess Jones expressed concern that a host of EU directives had not yet been transposed into UK law. The amendment was not pushed to a vote by Lord Deben. Gove did not reject stronger powers for Ofwat Political Agenda David Blackman "New CMA chairman has form as a climate sceptic." Andrew Tyrie, who has just been named chairman of the CMA, is best known for his seven-year term as head of the Treasury select committee. During his tenure, which ended in 2017, the Conserva- tive MP developed a deserved reputation as the hammer of the banks. But before he was elevated to the select committee, Tyrie was a prominent climate change sceptic. In 2008, he was one of just five MPs to vote against the into energy prices, the CMA already identified social and environmental obligations as the "main drivers" of domestic price increases from 2009 to 2014, alongside network costs. Green groups have so far made little fuss about Tyrie's appointment but starting at his confirmation hearing by the Business, Energy and Industrial Strategy select committee this week, they will be keeping a close watch on how the CMA chairman uses his new platform. Climate Change Act. To put this context, 463 MPs voted for the legislation. Tyrie likened the legislation at the time to the Dangerous Dogs Act as an example of "ges- ture politics". As recently as 2011, Tyrie called on the government to re-examine its climate change policy in a pamphlet for the Centre for Policy Studies, a right- wing thinktank. This history matters because Tyrie now has a powerful voice to speak up for consumers and potentially articulate his long- held argument that renewable subsidies are bad for bill payers. In its landmark 2015 report

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