Sustainable Development Advisory Group minutes March 2015

Publication date
16th October 2015
Information type
Policy area

This is a record of Ofgem’s Sustainable Development Advisory Group meeting held on 5 March 2015 at Ofgem, Millbank.

1. Attendance and apologies

1.1. See annex for attendance and apologies for the meeting.

2. Updates and agreement of minutes

2.1. The Chair began by passing on the sad news that David Harker, a non-executive member of GEMA and also a member of the SD     Advisory Group, had passed away. He expressed his gratitude for all the help and advice given to him by David in his time at Ofgem.

2.2. No new comments were raised about the minutes of the previous meeting.

3. Ofgem strategy

3.1. Dermot Nolan (Chief Executive) introduced the new Ofgem strategy. He described this as a codification and restatement of our goals, and emphasises our role as the regulator of the whole gas and electricity system.

3.2. The Chair highlighted work on risk appetite at Ofgem, which is running alongside the strategy. This will embed risk into our business plan and objectives.

3.3. Members made a number of points about the strategy:

  • Members sought assurance that Ofgem would not act outside of its existing remit in relation to social issues.
  • Some asked for more clarity over what powers Ofgem has to work towards each of the strategic aims contained in the document. There was also a discussion of whether there should be a clear hierarchy within Ofgem’s vision, to resolve conflicts where aims could conflict with one another.
  • Some members felt that regulatory principles would be difficult for companies to understand, while others argued that these could drive better outcomes than narrow frameworks.

3.4. Dermot concluded the discussion by saying that the strategy should be considered alongside the forthcoming Strategic Policy Statement, which could more clearly prioritise the strategic aims. The outcome of the CMA referral will also clearly have an impact on how we act as a regulator.

4. Grid connections

4.1. Olivia Powis (Smarter Grids and Governance) informed members about our open letter consultation on ‘quicker and more efficient distribution connections’. While there have been over a million connections since 2010, we know that some connections customers face issues when connecting. This open letter sets out what is currently permissible, sets out some scenarios by which connections for some customers could be made easier, and gives an opportunity for stakeholders to let us know about their experiences on the existing arrangements and provide suggestions for improvement.

4.2. Members discussed the issues covered, including:

  • The trade-offs involved, such as the risks and benefits of strategic investment, and who bears these, and the need to treat customers equally.
  • Members asked about the scale of the issue, including the number of projects prevented by high connection costs, and the size of the costs involved. Olivia told members that while each case is different, it is hoped that responses to the open letter should help us to identify the scope of these issues more clearly. Sarah added that in future we are seeking to better understand the potential benefits, as well as the costs, of these connections.
  • Some members had anecdotal evidence that this was an issue for community energy, and would seek to provide further evidence as part of the consultation.
  • Members discussed the wider causes of the connections cost issues, including the flat-rate design of subsidies. They also warned that while there may be a case for changing the current system, in other systems this has sometimes led to customers ‘free-riding’ on the network. They agreed that some parts of the issue involve a social choice around cost-distribution, which should be left to government.

5. Non-traditional business models

5.1. Jeff Hardy (Sustainable Energy Policy) presented our discussion paper on non-traditional business models (NTBMs). He thanked members for their feedback following the initial discussion on NTBMs (under the title of innovative business models) at the group meeting in June 2014. The work is vital for Ofgem to gain an understanding of the transformative potential of new entrants and business models.

5.2. Members raised a number of points about the discussion paper, including:

  • The regulatory treatment of the heat sector, and how the benefits of linking electricity and heat can be harnessed.
  • The impact of renewables on the wholesale market, and the need to consider what changes might be required to the market arrangements.
  •  How consumers will be protected by the regulatory and redress frameworks in regard to NTBMs, and how data security can be ensured.
  • Whether network companies will be able to adapt their businesses to offer new services which are enabled by smart metering and other changes.
  • How the benefits of NTBMs can be quantified, and how the wider social benefits can be taken into account.

6. AOB

6.1. No other business was raised.

7. Date of next meeting

7.1. The next meeting will be on 25 June 2015, from 10am to 12pm.

8. Annex – attendance and apologies

Chair

  • David Gray (Gas and Electricity Markets Authority)

 

SD Advisory Group members/Attending on behalf of absent members

  • Nick Eyre (Oxford University)
  • Doug Parr (Greenpeace)
  •  Jenny Saunders (National Energy Action)
  • David Sigsworth (SEPA)
  • Dr Nina Skorupska (Renewable Energy Association)
  • Audrey Gallacher, (Citizens Advice)
  • Phil Jones (Northern Powergrid)
  • Derek Lickorish (Fuel Poverty Advisory Group)
  • Jonathan Oates (Welsh Government)
  • Paul Ekins (UCL Energy Institute)
  • Sue Kearns (Scottish Government)
  • Eleanor Warburton (DECC)
  • Sonia McCorquodale Cruise (Good Energy)

Ofgem Staff

  • Dermot Nolan
  • Sarah Harrison
  • Michael Grubb
  • Philip Cullum
  • Stephen Bass
  • Jeff Hardy
  • Emma Powell
  • Olivia Powis
  • Harvey Beck
  • Katherine Thompson
  • Alex Belsham-Harris

Apologies

  • Juliet Davenport (Good Energy)
  • Nick Lakin (Kingfisher)
  • Tony Grayling (Environment Agency)
  • Giles Bristow (Forum for the Future)
  • Jeremy Nicholson (EEF)