Examination of Witnesses (Questions 60-75)
EDF ENERGY NETWORKS
16 SEPTEMBER 2003
Q60 Sir Robert Smith: Then there
is a supply company actually contracting with the consumer. So
when you talk about customers, are they your customers or is the
supply customer your customer?
Mr Cuttill: That is a very interesting
debate, but I think the answer is very, very simple: the customer
on the end of the line, whether they are paying London Energy
or N-Power or Centrica, they are my customer in terms of the restoration
and maintenance of their supply. There is no doubt about that.
Yes, it is the 30 or so suppliers who pay me my money on a monthly
basis, but there can be no doubt in my mind—and if October
did nothing else, it absolutely made it crystal clear—as
to who the customer thinks they are the customer of.
Q61 Sir Robert Smith: You talked
earlier about the greater investment you are putting into tree
cutting and managing the vegetation and the extra expenditure
there. I was intrigued also that in your evidence you talked about
mitigating tree damage by using covered overhead conductors. We
have heard a lot of talk about burying cables. And Scottish and
Southern have said in their evidence that, by using aerial bundled
conductors and BLX tree wire or something, in October 2002 just
1% of their faults occurred with these overhead cables, the ABC
ones, and only 3% occurred with the reinforced cables. Is there
a compromise there whereby, rather than going underground, you
can reinforce the network by overground and actually mitigate
the damage of trees?
Mr Cuttill: Perhaps, with your
indulgence, I will ask Mr Carey to answer the specific point,
because in the south-east network as well—what would have
been known as the SEEBOARD area—there has been quite a lot
of use of ABC there, so he can talk about that. Clearly, it addresses
the issue of wind-borne damage; it does not address the issue
of visual impact of overhead lines. In terms of the actual technical
aspect, Alan is probably best to answer.
Mr Carey: Sir Robert, in the programme
that we are carrying out now on tree cutting, part of that is
assessing as we go the options for using ABC, as it is called,
aerial bundled conductors, insulated conductors formed into one.
Q62 Sir Robert Smith: So probably
visually a bit more intrusive if you are not careful?
Mr Carey: You see one more solid
wire. It looks rather like a sort of a large BT wire, if I can
put it like that. So we are assessing that as we go, and we do
use the high voltage variant as well.
Q63 Sir Robert Smith: How does it
compare like for like? To a layman, if you have the same tree
falling towards one of those, is it five times stronger or . .
. ?
Mr Carey: In terms of wind-blown
material generally it is not susceptible in the same way as bare
wires, so that is a definite win. In terms of a 70-feet oak tree
falling on the line—which certainly happened—or a
barn roof—which certainly happened—it is a bit more
robust but it is not absolute.
Q64 Sir Robert Smith: If you were
planning this increased expenditure on the tree felling as well
and clearing the lines, we would be interested to know if you
have had any problems occurring in terms of these environmental
concerns about taking too many trees or from landowners exercising
their rights to restrain you or . . .
Mr Cuttill: I would say to that,
that we see about one in five cases where there are some energetic
discussions with the landowners, so in four out of five cases
we get immediate cooperation. In the 20% that I have referred
to, discussions have to be had. It is about dialogue with the
landowners. We have to be clearly careful in terms also about
saying, "Well, you've actually got some statutory powers,
why don't you use those." The difficulty is that these landowners
are probably the very same landowners with whom we have many,
many wayleaves, easements and permissions to site poles on their
land. So it is not only a debate about the specifics, about how
we clear the line, it is a 40 or 50 or 60 year debate about having
equipment on their land as well, so we have to balance the use
of statutory powers with an ongoing relationship with a landowner.
Q65 Sir Robert Smith: Could they
actually restrict your use of their land?
Mr Cuttill: Yes.
Q66 Sir Robert Smith: So you do not
have a right to have the equipment there?
Mr Cuttill: We have to have wayleaves
and easements in terms of the way we deploy our equipment across
private land.
Q67 Sir Robert Smith: Presumably
where that is already there, they could not get you to remove
it now.
Mr Cuttill: It very much depends.
For instance we could find a landowner where the lease or the
wayleave is up for renewal. If we come along and say, "we
are going to fell 20 of your prize oaks and by the way can we
have a new wayleave?", it might be a slightly difficult conversation
to have.
Q68 Sir Robert Smith: Can I finally
clarify something, in your choice of options you talked a lot
about responding to a severe crisis, it seems to be the debate
is the degree with which you engineer the network to survive a
crisis or the degree with which you realise it is going to fail
at some point and then you engineer a robust response system,
which do you think is the better deal for the customer in terms
of investment and customer experience, would they prefer to pay
a bit more for the electricity and know it is going to survive
a 100 year storm or pay a bit less but know it is going to be
back on within 12 hours?
Mr Cuttill: We have undertaken
some analysis with customers on that very point and you may not
be surprised to hear that they do not wish to pay more to protect
against the 100 year event, that is anecdotal, that is what they
tell us. The point you make is the very nub of the balance between
designing a system for normal foreseen eventualities and how you
build or fund an organisation for the one in 100, or whatever
the ratio is now, with the changes that we are seeing. That is
the very nature of the debate round distribution price control
review, it is how the funding and the economics for distribution
businesses are shaped over the five years, we are into that now.
The balance is always between how much contingency do we build
in in terms of, do you go to the third fault, the fourth fault
condition or do you go to the tenth or eleventh or twelfth. If
you go for the latter then the amount of redundancy you have to
put into the system would be very, very significant in terms of
expenditure. That is the very balance that we have to strike.
Clearly in our conversations with Ofgem that is at the very heart
of the debate about investment.
Q69 Sir Robert Smith: As a regional
monopoly what motivates you to get this right?
Mr Cuttill: What I would say to
that is that the desire is or the motivation is to provide good
levels of customer service. We have seven and a half million customers
relying on us for this service. We are the licence holders for
these three networks and that brings us obligations and we wish
to meet those and clearly, where we can, provide enhanced levels.
That is the motivation for us. As an organisation we believe in
the power of having a business backed off with physical assets
and on that basis we must have an emphasis in our minds of serving
our customers, who are relying on us.
Q70 Mr Lansley: When everything goes
wrong, I am sure you would agree, customers have a right to expect
compensation and you have agreed to provide compensation for customers
who lost supply beyond the benchmark times, as discussed with
Ofgem, so you are extending that to those who claimed within three
months, and clearly that is a welcome agreement on your part.
Reverting to October last year, why did you think it was appropriate,
even though it was an exceptional weather event, for you to choose
the time you would compensate customers and to choose 100 hours
as the point at which it was reasonable to do so?
Mr Cuttill: The payments we made
voluntarily in the days immediately after the storm were for something
that no other DNO did in the country who was affected by this.
Our sense was that by 22.00 hours on the Thursday we were the
last remaining company to have customers still disconnected from
the event on the Sunday and that led us to conclude that that
was an appropriate point to draw, after which we would provide
what we called a "storm payment" for the inconvenience.
The system by which distribution network operators, as it were,
waived the normal compensation for interruptions is a system that
has been in place all of the way since 1990 and in the events
where we have seen weather-derived incidents that has always been
the approach across the country in the first instance, to waive
those payments and then the determination process follows. That
is what happened with October. The difference, as you described,
is that we decided to make a special payment and drew a line at
22.00 on the Thursday because at that point it was clear that
we were the last remaining DNO to have customers disconnected.
Q71 Mr Lansley: We are going to go
on to discuss with other witnesses the question of what the compensation
scheme should look like in future but would you accept that in
practice thousands of customers did not have their supply restored
at a time which was reasonable for you to have achieved and in
practice choosing to say that you would only pay compensation
from Thursday evening meant that thousands of customers were led
to believe they were not eligible for compensation when they ought
to have been?
Mr Cuttill: I think that the point
I would make is that we were, I think, careful in how we described
the £100 payment we were making. We referred to it as a special
storm payment. We were clear that the issues round compensation
in terms of the determination process would follow thereafter.
In the normal course of events compensation under the Guaranteed
Service Standards arrangements do not come into play until after
18 hours of disconnection. Clearly many, many of the customers
who were affected by the disconnection on the Sunday—even
in the event of the normal GSS arrangements applying—had
their power restored before that period in time. I think what
we did was a step towards recognising that there were customers
who had not received the restoration service to which they should
be reasonably entitled.
Q72 Mr Lansley: I suppose what I
am saying is if there were 170,000 customers who did not have
their supply connected within 24 hours it would be better in future
if everybody who has lost supply for an unacceptable length of
time is either automatically compensated or for the companies
concerned, the DNO concerned, to make it clear that everyone who
has lost supply for longer than 18 hours needs to register a claim
and to register their circumstances so that it can be assessed,
rather than the utter confusion which resulted after October.
Mr Cuttill: What I would say is
that I think that the incident in October has obviously put into
sharp focus this whole area. There are discussions under way with
Ofgem in terms of how not only we should respond in terms of the
winter season that is coming—so that something has to be
put in place in terms of how we respond—but also then that
the final solution (and I am sorry to come back to the distribution
price control review again) is a fundamentally different final
solution, if that is where we get to, and will be arrived at as
part of the distribution price control review process. We have
this particular season to deal with and we can then work with
colleagues to understand and arrive at what the final long-term
solution should be if it is found that the current arrangements
are no longer appropriate.
Q73 Chairman: On this question of
metering, and I know this is not your responsibility, am I right
in saying at the present moment the systems of metering are not
sufficiently sensitive to be able to identify, in terms of times
and dates, to know there has been an interruption and record it
for that length of time?
Mr Cuttill: I do not believe so.
Mr Carey: The meters register
units consumed they do not report times of supply.
Q74 Chairman: This is an old hobby
horse of mine, it is in your interests or in the interests of
EDF as a whole to have comparatively unsophisticated metering
systems because interruptions of any kind or cheaper tariffs will
not be included as long as you have this kind of simplistic system
that you have, which is antediluvian in the extreme, but if you
were using it for distributing electricity we would still be literally
in the Dark Ages. Would that be reasonable?
Mr Cuttill: I am not too sure
I would agree.
Q75 Chairman: I will not put words
in your mouth.
Mr Cuttill: I think the whole
debate about the efficient use of energy and the way that energy
is metered is clearly a very deep debate for another day
Chairman: Mr Cuttill, we realise you
are a glutton for punishment this morning, I am not going to ask
you if it is by choice or not. You are going to be joining us
with the EA team in a minute. We will not be surprised if you
do not contribute as much as you have and be as fulsome. We are
very grateful to both of you. If you could send us that note on
the question of the comparative costings we would be grateful.
Thank you very much indeed.
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