Consultation Submissions

Whilst this is a regulatory question on how customers should pay for the cost of supplier failure, there are material 'real-life' additional costs involved for every customer when household budgets are already tight. We think a move to a volumetric recovery of Supplier of Last Resort costs on electricity would be more progressive and fairer than recovery through the standing charge, and give consumers greater control over their energy costs.

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In this submission, we make high-level comments on locational pricing - in particular on the customer impacts and fairness and on scope and sequencing - before turning to specific questions Ofgem has raised. We argue that the underlying charging structures need to send the right price signals to encourage the demand side to play the invaluable role needed to achieve net zero. It is important that the consumer voice is brought into these debates, which cannot be left to technical discussions in industry dominated working groups. 

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Success in net-zero delivery, including ensuring an inclusive transition, will require Ofgem to look well beyond the scope of this narrowly framed document. In particular: any institutional arrangements at a local level aimed at addressing net zero have to look more widely than just at energy. Even in the narrower context of energy there is a need to think more broadly about potential future challenges to the energy system.

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We fully support the need for a Strategic Policy Statement, and also recognise that it needs to be part of the strategic objectives which have been set for Ofwat in legislation. The SPS admirably seeks to give these steers which are, welcomely, significantly more numerous and granular than in the 2017 SPS. We outline our response to Defra’s three key questions and make suggestions for improving the SPS. But we also argue that the SPS would be greatly improved if – either within the document or elsewhere – ministers set out a strategic vision for a future water industry.

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The National Infrastructure Commission’s Baseline Assessment Report identifies the key challenges that will shape our infrastructure and quality of life for decades to come. Infrastructure has a significant impact on net zero ambitions, biodiversity, affordability and the levelling-up agenda. Identifying and addressing the associated risks and opportunities is crucial for a sustainable and resilient future.

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While generally supportive of the substance behind the Business Plans, we call for far more consistent metrics. Affordability is a critical customer issue, but the focus on short term bill impacts should not lead Ofgem to cut back on investment to improve resilience. Two areas that need further attention are energy losses and the greenhouse gas SF6, commonly used as an effective insulator.

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Sustainability First has been a strong advocate of innovation funding in the energy and water sectors. We hope that the following points are helpful as Ofgem learns from past experience with the Network Innovation Allowance (NIA) and the NIC and considers its future approach to the Strategic Innovation Fund (SIF).

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To get change at the scale and pace needed to deliver on our net zero commitments, and to enable the more fundamental systems change needed to ensure the wellbeing of people and planet, competition and consumer protection laws will need to reorientate to give far greater weight to net zero and resilience. Delivering sustainability often requires a difficult balancing act, trade-offs and identification of win-wins which can be complex and challenging.

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