Flooding costs to energy networks ‘insignificant’, says Moody’s

Energy networks' prompt response to Storm Eva on Boxing Day has avoided a repeat of the fallout from the 2013 storms that saw companies pay £8 million in compensation, Moody’s has said.

The ratings agency said Electricity North West (ENW) and Northern Powergrid’s quick reconnection of customers leaves them facing “insignificant” costs, although the full reparation bill will not be known for some time.

Moody’s expects Northern Powergrid to make compensation payments of £0.25 million to its customers after only 1,400 of the 37,000 customers who lost power in the storm were not reconnected within the required 48-hour period.

Moody’s said ENW will be liable for £0.1 million in compensation payments to the 1,250 customers left without power after 48 hours.

It said ENW and Northern Powergrid’s fast response in comparison to the much slower response by SSE and UK Power Networks after a larger storm in 2103 avoids “any additional penalties or significant public criticism”.

After the 2013 storm SSE and UK Power Networks (UKPN) made compensation payments of £4.7 million to 16,000 customers after they failed to bring customers back on power in good time. Ofgem required them to pay a further £3.3 million.  

Under Guaranteed Standards Payments set out in the regulatory regime, networks are obliged to compensate customers £70 if they are left without power for more than 48 hours after a category two “large event”, such as Storm Eva.

Customers are also entitled to an additional £70 for each additional 12-hour period they remain off the grid, up to a maximum of £700 each.

Moody’s said it expects Ofgem to classify Storm Eva as an exceptional severe weather event, meaning the impact of the flooding will be excluded from the Interruptions Incentive Scheme that is set to reward Northern Powergrid £9.3 million and ENW £11.3 million in 2015-16 respectively for their performance in reducing supply interruptions.

The agency said in the “unlikely” event Ofgem does not exempt the storm costs, the companies would each lose £3 million of the payment.