Scottish and Southern Electricity has issued a detailed response to Dieter Helm’s Cost of Energy review, picking fault with what it considers key oversights and a lack of accompanying evidence.
Last week the energy company published its response to the government’s call for evidence surrounding Helm’s review, which the Department for Business, Energy and Industrial Strategy launched late last year to gain further industry insight into his proposals.
While SSE agreed with many of the topics raised within Helm’s review, published last year, it did pick fault with issues discussed in relation to network companies and policy costs added to bills.
And the energy giant reserved particular criticism for Helm’s failure to recognise the progress distribution network operators had made in their transition towards more system operator duties, which SSE labelled a “key oversight” within Hem’s work that “called into question” his recommendations for energy networks.
Going further, SSE said that some of Helm’s recommendations in this space had the potential to delay the transition to a more decarbonised energy system.
Two proposed changes came in for particular criticism, namely the separation of CfD contracts into build and operational phases and the establishment of Equivalent Firm Capacity (EFC) auctions to replace continued capacity procurement.
SSE said the review had provided “no evidence” to support Helm’s consideration that making renewable energy pay to effectively “self-balance” – Helm’s EFC auctions had been proposed as a means of making renewables accountable for their variable nature within an auction process – would result in cheaper outcomes for consumers.
Instead the company insisted that all running energy markets, including wholesale, Capacity Market, balancing and ancillary services, must “evolve in a coordinated way” in order to avoid distortions.
Some of Helm’s points were however welcomed, particularly the notion that the government must revise its approach to how policy costs are viewed and recovered. SSE argued that the status quo was effectively incentivising people avoiding policy and network costs added to energy by adopting behind the meter generation and storage solutions (i.e. residential solar-plus-storage installs), which was in turn increasing bills for people unable to do the same.
This falls under Ofgem’s targeted charging review which remains ongoing. Ofgem discussed the matter towards the end of last year and is expected to come forward with a minded to decision before the summer.
SSE said there needed to be greater focus on and debate surrounding network costs with policy outcomes and their priority status in need of more prominence.
SSE also issued words of caution over the future of the RIIO programme, a politically contentious subject given the profits network companies have managed to make. Ofgem has issued numerous warnings to network operators that the next set of RIIO controls to run through the 2020s will be tougher, however SSE has warned against both short-term changes and potential alternatives.
SSE was among the first to defend RIIO last summer when criticism began to ratchet up.
The company said it was “keen to address the negative representation of benefits” delivered by RIIO and warned that any changes to it risked “significantly delaying” the UK’s energy transition, but did also conclude that the mechanism’s purpose beyond 2030 was open to debate.