INSIGHT – Editor’s Week

As temperatures began to dip this week the heat ramped up over the UK government’s measures to keep the lights on. Plans to bring forward investment in new gas-fired power faltered with the news that a project which won a capacity contract almost a year ago is still searching for investment. And of more immediate concern is the coming winter which National Grid says will be tight, but manageable. Also feeling the political heat this week was Ofwat following a report from the National Audit Office which claims water companies enjoyed an unexpected windfall under the regulator’s watch. Ofwat boss Cathryn Ross was on hand at Utility Week Congress (held in Birmingham on 14/15 October) to say the headline findings don’t tell the full story.

Capacity crunch

In the same week that National Grid announced that winter supply margins would be the tightest seen for the last ten years, a gas-plant developer told the national press that a lack of investor appetite is set to delay the project.

National Grid said that it would purchase 2.4GW of extra capacity to pad the UK’s meagre 1.2 per cent supply margin out to a still-tight 5.1 per cent. The system operator admitted that there is an “increased likelihood” that the extra balancing reserve brought in for this winter will be called upon, but that it had the “right tools in place” to manage the system.

Longer-term concerns were raised by Carlton Power, which told the Telegraph that its Trafford gas-fired power plant has still not been able to secure the investment needed to drive the £800 million project forward, meaning it will not be available to supply power by its contracted 2018 start-date.

The news confirms concerns reported by Utility Week last year that UK generators would continue to face challenging market conditions despite the auction contracts.

Water firm windfall

Meanwhile, Ofwat felt the glare of the national media spotlight following a report from the NAO which claimed that water companies pocketed £815 million between 2010 and 2015 as a result of the low interest rate environment and cuts to corporation tax.

It acknowledged Ofwat’s efforts to encourage companies to share gains with customers over the period, with an additional £435 million being returned to bill payers over that five-year period, but says more needs to be done in PR19 to “increase the pass through”.

Cathryn Ross appeared at Utility Week’s annual Congress event in Birmingham, hitting out at any suggestion that Ofwat had taken its eye off the ball. “It’s not new news,” she told delegates, explaining that the effect of the rate of change had been noted in 2013, and water companies told to adjust their plans accordingly.

In an exclusive interview with Utility Week Ross ruled out the introduction of a windfall clawback mechanism in future price reviews. “Is there going to be a retrospective clawback in PR19? No there isn’t,” she said.