|
Both the companies themselves and the public sector bodies responsible for the industry—Ofgem, the DTI and energywatch—have worked hard to draw the correct lessons from the October 2002 storms and to implement appropriate changes to practice. We commend in particular the work of the Network Resilience Working Group in achieving a consensus on what needed to be done and driving forward implementation. We conclude that the distribution companies are now significantly better prepared to deal with the aftermath of severe weather than they were in October 2002.
Electricity distribution companies need sufficient revenue to replace ageing infrastructure, maintain the network adequately, and invest in improved quality of service and in the new construction needed to accommodate renewable generation. We are increasingly confident that Ofgem will address all these requirements in its approach to the price control process. Although Ofgem has not gone as far or as fast as we would wish in terms of capital expenditure allowances, the regulator's proposals for the 2005-10 period still represent a marked improvement — and, given a history of previous under-investment by companies, we understand Ofgem's caution. It is for the companies in the forthcoming price control period to prove that they can use their capital expenditure allowances effectively.
We are less happy about the continued regulatory pressure on operational expenditure. While there may still be efficiencies to be gained by the companies, we fear that the DNOs may have to make real cuts in the amount and quality of maintenance of their networks if such pressure continues. We recognise that consumers are unhappy about recent increases in electricity bills, which stemmed from rises in generating costs; but we are aware that, in several recent major incidents, power cuts were caused either directly or in a contributory way by maintenance problems. We believe that customers would be willing to pay a little extra to reduce the incidence of such power cuts.
| 
