Utility Week

UTILITY WEEK | 4TH - 10TH MAY 2018 | 3 This week 4 | Seven days 6 | Utility Week Live Prosumers: a force to be reckoned with. We preview 'disruption and customers' at the leading utilities exhibition and conference on 22-23 May. 11 Policy & Regulation 11 | News NIC: drought could cut off water supply 12 | Opinion Frances Warburton, Ofgem 13 | View from the top Felix Lerch, Uniper UK 15 | Analysis The government's zero emissions goal up for review 16 | Analysis Can water transfers solve regional water shortages? 17 | Analysis Exclusive research into the digital transformation of utilities 21 Finance & Investment 21 | News Anglian winding up offshore subsidiary 22 Operations & Assets 22 | High viz Orsted's Hornsea Project One substation 23 | Expert view Colin Beaney, IFS 24 | Awards case study Supply Chain Excellence: Anglian Water's @one alliance 26 | Analysis The full shortlist for this year's Stars Awards 28 Customers 28 | News Suppliers could enter energy 'in thousands' 30 Community 31 | Disconnector GAS 28 | News Flogas Britain rebrands mains arm WATER 11 | News NIC: drought could cut off water supply 16 | Analysis Can water transfers solve regional water shortages? 21 | News Anglian winding up offshore subsidiary 23 | Expert view Colin Beaney, IFS 24 | Awards case study Supply Chain Excellence: Anglian Water's @one alliance ELECTRICITY 15 | Analysis The government's zero emissions goal up for review 22 | High viz Orsted's Hornsea Project One substation ENERGY 11 | News New CMA chief should focus on energy 12 | Opinion Frances Warburton, Ofgem 13 | View from the top Felix Lerch, Uniper UK 17 | Analysis Exclusive research into the digital transformation of utilities 26 | Analysis The full shortlist for this year's Stars Awards 28 | News Suppliers could enter energy 'in thousands' Leader Ellen Bennett Ofgem wise to waive mid-period review O fgem's senior partner for networks, Jonathan Brearley, looked out over the banks of the Rubicon – and thought better of it. This week's announcement that there will be no mid-period review of RIIO-ED1 for power networks shows Ofgem listened care- fully when networks and their investors warned that to change the financial terms of the regulatory settlement halfway through the period would be disastrous for investor confidence and hence the cost of capital. Indeed, Ofgem even put a number on it – a change to the terms now could put an extra £3.1 billion on the cost of capital in the next regulatory period. That's a sobering thought for any regula- tor. A cut to network returns would certainly play well in the media – but not at the expense of higher bills in just a few years' time. So why the false alarm? Perhaps Ofgem was testing the market with its now notorious option three – the option of the mid-period review consultation that raised the prospect of reviewing "financial and incentive performance and design". If so, it may have been shaken by the strength of reaction from investors. Numbers don't lie, and as Western Power Distribution's (WPD) chief executive Robert Symons told Utility Week earlier this year, the very prospect of the mid-period change wiped one-fih off the share price of the network's parent company in the US. There will have been numerous private conversations in a similar vein between networks, investors, and Ofgem's chairman David Gray, chief executive Dermot Nolan and Brearley. Ofgem may also have been showing its strength. Certainly, the prospect of a mandatory change to the regulatory settlement may have been on networks' minds as they agreed a number of voluntary returns. WPD has agreed to return £77 million relating to changes to the government's rail electrification programme, bringing the total voluntary returns by gas and power transmission and distribu- tion networks over the RIIO1 settlement to more than £700 million. Ofgem also retains the option of clawing back allowance under- spends at the end of the price control period. It was a wise move on Ofgem's part to stand down, and one that will serve the regulator well as it moves on to the next battle: the cost of capital in RIIO2. Investors will look more kindly on a lower – even a much lower – cost of capital, if they can be confident in the integrity of the regulatory deal. As of this week, they can be. • Utility Week is taking its annual spring break from print next week. We'll be back in print on 18 May; meanwhile, all the news and analysis will be available at utilityweek.co.uk. Ellen Bennett, Editor, ellenbennett@fav-house.com Knowledge worth keeping Subscribers to Utility Week can access premium content and exclusive research, available to read online or as downloadable documents. http://www.utilityweek.co.uk/

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