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One out of three isn’t a bad start – or so it seemed to power networks this week, when the first of the industry’s three ongoing Competition and Markets Authority (CMA) referrals made its final report.
The CMA’s ruling on the power networks’ regulatory settlement, RIIO-ED1, involved a little bit of tinkering around the edges, but was broadly speaking good news for the networks. Challenger British Gas had egg on its face, with four out of its five grounds of appeal dismissed. It can take cold comfort in the one that was upheld, around the information quality incentive scheme, that will see networks’ allowed revenues come down by £105 million over the period.
It wasn’t a bad day’s work for Northern Powergrid, the one network that had challenged the settlement for being too low, in contrast to British Gas’s allegation that it was too high. The Warren Buffett-owned company walked away with an extra £11 million over the period – interestingly, the CMA upheld its challenge to Ofgem’s assessment of potential savings arising from innovation around smart grids, an area that caused much muttering among its peers. While Northern Powergrid’s upside was relatively small beer, it may make an appeal look more attractive to other networks in future.
In the meantime, it’s down to business. Ofgem can breathe a sigh of relief, the industry can get on with the job, and hopefully the CMA’s independent thumbs-up will be enough to keep the vultures away when it comes to the mid-point reviews of RIIO.
• Sacha Deshmukh is doing a good job at Smart Energy GB, and the confidence he displays in this week’s interview (p8) will be needed as the smart meter rollout approaches the mass launch. But it’s not enough. Smart Energy GB’s advertising campaign, featuring the cartoon characters Gaz and Leccy, is fine as far as it goes – but lovable characters aren’t going to melt any householder’s heart if they’re dealing with a rollout that’s late, messy and poor value for money.
There’s one simple measure the government can take immediately: give the industry the full five years initially planned for the rollout. As the go-live date of the DCC has moved back, so too must the end date of the programme, to April 2021. This programme is too big, and too important, to be squeezed. Energy suppliers want to deliver for customers, and they must be allowed the period of time they were initially given to do so.
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