Utility Week

UTILITY WEEK | 29TH JUNE - 5TH JULY 2018 | 11 Policy & Regulation This week Cut to embedded benefits is upheld Legal challenge fails to block Ofgem's decision to slash the value of triad avoidance payments Ofgem's decision to slash the value of triad avoidance pay- ments has been upheld follow- ing a failed legal challenge. The ruling, handed down on 22 June by the High Court, was welcomed by the regulator, which said it would continue to take action to champion the interests of consumers and "robustly defend its decisions when challenged". Triad avoidance payments are one of a number of financial advantages, known as embedded benefits, enjoyed by smaller generators connected to distribution networks. They receive the payments for helping suppli- ers to reduce their Transmission Network Use of System (TNUoS) charges, and are able to do so because the elec- tricity they produce is treated as net negative demand during the triad periods used to determine the charges. The charges contain a forward-looking element, which reflects the cost of reinforcements needed to accommodate individual network users, and a residual element, which covers the sunk costs of the existing transmission network. In June last year, Ofgem confirmed plans to almost entirely remove the triad avoidance payments relating to the residual element of the transmission charges, which at the time stood at roughly £47/kW and were otherwise projected to rise to around £70/kW by 2020/21. The regulator said the payments gave an unfair advantage to distributed generators and were distorting the market. But a group of eight companies led by peaking plant developer Peak Gen applied for a judicial review of the decision. TG ELECTRICITY Eurelectric backs post-Brexit tie-up Europe's electricity industry has thrown its weight behind efforts to maintain the UK's integration into the wider EU energy market. Eurelectric, which represents the electricity industry across Europe, has called on policy- makers to minimise disruption to the energy and climate agenda resulting from Brexit. In a paper issued ahead of this week's EU summit, Eurelec- tric called for continued whole- sale energy market integration, cross-border interconnection and efficient energy trading arrange- ments between the trading bloc and the UK post-Brexit. It backs UK groups remaining full mem- bers during the Brexit transition period of EU bodies such as the regulatory organisation ACER, as well as ENTSO-E and ENTSOG, which operate the electricity and gas network codes respectively. The paper also recommended the UK should participate in these bodies "to the largest extent pos- sible" aer the transition period, to prevent regulatory divergence or oversight that could create barriers to cross-border trade. ELECTRICITY Commission clears Uniper acquisition The European Commission has unconditionally approved the acquisition of Uniper by the Finnish utility Fortum aer con- cluding the deal would raise "no competition concerns". The Russian Federal Antimo- nopoly Service has also cleared the purchase. Fortum said the conditions for the takeover had therefore all been satisfied, and it would complete by 27 June. Margrethe Vestager, the com- missioner in charge of competi- tion policy, said: "We found that competition will remain strong." WATER Wastewater 'can boost sustainability' Scottish organic waste can "provide environmental and economic opportunities", according to a report published by Scotland's Centre of Expertise for Waters (CREW). The report, compiled by experts from Scottish Water and the Scottish Environment Protec- tion Agency (SEPA), will be used to help find new ways to recover more resources from the waste Scotland manages and generates. With this in mind, environ- ment secretary Roseanna Cun- ningham has announced a new partnership between SEPA and Scottish Water, under which they will develop ways to: manage rainwater and wastewater drain- age; generate wealth by maxim- ising recovery of resources; and invest in protecting the quality of Scotland's water environment. Set in stone: cut to triad avoidance payments Political Agenda David Blackman "Clark has put Cave forward as the new chair of Ofgem" In the court of the Depart- ment for Business, Energy and Industrial Strategy (BEIS), the consumer is king. That was the message the department's head, business secretary Greg Clark, wanted to communicate with the 25 June announcement that he has put forward Professor Martin Cave as the new chair of Ofgem. The regulatory economist's highest profile public interven- tion was the dissenting report he issued when deputy chair of the the utility sector. And Ofgem has come under fire from critics, most notably in parliament, that it has not been tough enough on the big six energy companies. Cave's appointment is there- fore likely to be music to the ears of the BEIS select committee, which will vet his appointment. Energy minister Claire Perry told the committee earlier this year that Ofgem had to change. Cave's elevation looks like a sign that this statement was not empty rhetoric. investigation by the Competition and Markets Authority (CMA) into the energy market. With its recommendation of a temporary price cap on standard variable tariffs, Cave's minority report has proved ultimately more influential than the main study's emphasis on measures to promote switching. Cave's thinking cannot be labelled as one-dimensional, though. Before the CMA report, his recommendation to allow competition for business water customers paved the way for the government's liberalisation of the non-household market last year. So he is clearly not afraid of confronting vested interests in

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