Growth and Infrastructure Bill

Memorandum submitted by Energy Network Association (GIB 10)

Growth and Infrastructure Bill Clause 16: Gas Transporter payments under licence

Energy Networks Association (ENA) represents the ‘wires and pipes’ transmission and distribution network operators for gas and electricity in the UK and Ireland. Our members control and maintain the critical national infrastructure that delivers these vital services into our homes and businesses.

I am writing to express our full support for Clause 16 of the Growth and Infrastructure Bill. This deals with licences and charges for gas transportation. Operating licences are issued by Ofgem, the energy regulator, under the Gas Act 1986 to energy companies who transport gas. Through these licences Ofgem can set and vary general conditions.

Energy transmission and distribution are still subject to price control regulation because electricity and gas are both transported via national transmission systems which are run as monopoly businesses and distribution is also still largely a regional monopoly activity. The forthcoming gas distribution, transmission and electricity transmission price controls are being implemented by Ofgem under the new RIIO framework (Revenue = Incentives + Innovation + Outputs) in April 2013 for a period of 8 years until 2021.

Under Ofgem’s latest gas distribution (low pressure transport) and transmission price control proposals, the regulator will introduce Network Innovation Competitions (NIC). Under these annual competitions network companies will compete for funding for research, development and trialling for new technology, operating and commercial arrangements. This means that gas licence holders need to be able to pay licensees other than just other gas shippers or suppliers.

This Clause clarifies the existing situation, and allows for these changes. It will remove an ambiguity to the Gas Act which prevents Ofgem from launching an innovation competition that could attract £160 million of additional investment into the gas network (across gas distribution and transmission) to make it more efficient.

In the light of the above I strongly urge the Committee to fully support this critically important clause to ensure the continuation of a process of innovation which helps companies deliver better service to customers efficiently and in a sustainable way.

November 2012

Prepared 14th November 2012