Jan 26, 2021

Ofgem calls for independent electricity body

OFGEM
electricity
Netzero
Dominic Ellis
3 min
Chief Executive says energy system needs to go undergo the biggest transformation in over a century to meet Britain’s ambitious climate goals
Chief Executive says energy system needs to go undergo the biggest transformation in over a century to meet Britain’s ambitious climate goals...

Ofgem has recommended creating an independent body to help lead the UK towards net zero emission targets at the lowest cost to consumers.

The body, fully separate from National Grid, would run the electricity system, helping to charge millions of electric vehicles and enabling a huge increase in renewable power while maintaining secure energy supplies.

Last month, the government committed to consult on reviewing the management of the energy system. It acknowledged that any additional responsibilities may require greater independence from National Grid, which has managed the energy system since privatisation.

Ofgem, which will work closely with government in its review, has estimated that an independent body with new responsibilities for running the electricity system could save consumers £0.4-£4.8 billion between 2022 and 2050. 

Its new responsibilities would include taking a more active role in designing and planning new grid infrastructure and providing independent advice to the UK Government on how best to hit its target of net zero emissions by 2050. In December, it pledged £30 billion upfront funding to deliver a clean and reliable energy system.

This body, or Independent System Operator, would be fully separated from National Grid, which also owns the electricity transmission network, to avoid any perceived or real potential conflict of interest.

In 2019 a legally separate function was created within National Grid to manage the electricity system to help conflicts.

Given the scale of the net zero challenge, Ofgem is recommending government goes further and considers full separation, which would help ensure future decisions on how to manage the energy system are taken in the interests of consumers, helping to keep costs as low as possible.

Jonathan Brearley, chief executive of Ofgem, said: “The energy system needs to go undergo the biggest transformation in over a century to meet Britain’s ambitious climate goals. Ofgem is recommending the creation of an independent body to help deliver the fundamental changes in how we use energy.

“This would help bring forward green economic growth, accelerate our journey towards net zero and save consumers money on their energy bills.” 

Kwasi Kwarteng, Business and Energy Secretary, said as the first major economy to commit in law to net zero carbon emissions by 2050, the UK is leading the green industrial revolution.  

“Meeting our far-reaching targets will mean changes to how we turn the lights on, travel to work and even cook our meals. Which is why we must ensure that the energy system is designed to provide the very best for consumers and allows energy companies to keep innovating as we build back greener.

“I welcome Ofgem’s contribution to the debate over the future structure of our energy system and will consider its recommendations thoroughly."  

Promoting low-cost renewables is one of Ofgem's five strategic pillars - along with embracing new technologies and fostering a 'data-enabled energy sector, with ubiquitous smart metering and open access to data stimulating new services and markets, and reducing costs' (click here). 

Read more on digital's role in reaching net zero targets in the February magazine.

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Jul 26, 2021

Ofwat allows retailers to raise prices from April

Ofwat
Utilities
water
prices
Dominic Ellis
3 min
Ofwat confirms levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue

Retailers can recover a portion of excess bad debt by temporarily increasing prices from April 2022, according to an Ofwat statement.

The regulator confirmed its view that levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue, thereby allowing "a temporary increase" in the maximum prices. Adjustments to price caps will apply for a minimum of two years to reduce the step changes in price that customers might experience.

Measures introduced since March 2020 to contain the spread of Covid-19 could lead to retailers facing higher levels of customer bad debt. Retailers’ abilities to respond to this are expected to be constrained by Ofwat strengthening protections for non-household customers during Covid-19 and the presence of price caps.  

In April last year, Ofwat committed to provide additional regulatory protection if bad debt costs across the market exceeded 2% of non-household revenue. 

Georgina Mills, Business Retail Market Director at Ofwat said: “These decisions aim to protect the interests of non-household customers in the short and longer term, including from the risk of systemic Retailer failure as the business retail market continues to feel the impacts of COVID-19. By implementing market-wide adjustments to price caps, we aim to minimise any additional costs for customers in the shorter term by promoting efficiency and supporting competition.”  

There are also three areas where Ofwat has not reached definitive conclusions and is seeking further evidence and views from stakeholders:   

  1. Pooling excess bad debt costs – Ofwat proposes that the recovery of excess bad debt costs is pooled across all non-household customers, via a uniform uplift to price caps. 
  2. Keeping open the option of not pursuing a true up – For example if outturn bad debt costs are not materially higher than the 2% threshold. 
  3. Undertaking the true up – If a 'true up' is required, Ofwat has set out how it expects this to work in practice. 

Further consultation on the proposed adjustments to REC price caps can be expected by December.

Anita Dougall, CEO and Founding Partner at Sagacity, said Ofwat’s decision comes hot on the heels of Ofgem’s price cap rise in April.

"While it’s great that regulators are helping the industry deal with bad debt in the wake of the pandemic, raising prices only treats the symptoms. Instead, water companies should head upstream, using customer data to identify and rectify the causes of bad debt, stop it at source and help prevent it from occurring in the first place," she said.

"While recouping costs is a must, water companies shouldn’t just rely on the regulator. Data can help companies segment customers, identify and assist customers that are struggling financially, avoiding penalising the entire customer in tackling the cause of the issue."

United Utilities picks up pipeline award

A race-against-time plumbing job to connect four huge water pipes into the large Haweswater Aqueduct in Cumbria saw United Utilities awarded Utility Project of the Year by Pipeline Industries Guild.

The Hallbank project, near Kendal, was completed within a tight eight-day deadline, in a storm and during the second COVID lockdown last November – and with three hours to spare. Principal construction manager John Dawson said the project helped boost the resilience of water supplies across the North West.

“I think what made us stand out was the scale, the use of future technology and the fact that we were really just one team, working collaboratively for a common goal," he said.

Camus Energy secures $16m funding

Camus Energy, which provides advanced grid management technology, has secured $16 million in a Series A round, led by Park West Asset Management and joined by Congruent VenturesWave Capital and other investors, including an investor-owned utility. Camus will leverage the operating capital to expand its grid management software platform to meet growing demand from utilities across North America.

As local utilities look to save money and increase their use of clean energy by tapping into low-cost and low-carbon local resources, Camus' grid management platform provides connectivity between the utility's operations team, its grid-connected equipment and customer devices.

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