the-eleventh-hour-1156792_1280

Iberdrola “two decades ahead of energy transition” and making it pay

Scottish Power parent Iberdrola’s 13 per cent surge in group profits to £2.89 billion (€3.4 billion) last year reflects its two decades of steady renewables investment, according to CEO Ignacio Galán.

Galán said its push into clean generation puts Iberdrola “20 years ahead of the current energy transition.”

The group’s full 2019 results reveal a record 2.8GW of new green generation capacity, including East Anglia One’s first turbines commissioned last year. A further 9GW is under construction worldwide.

Iberdrola’s UK activities posted a net profit of £347 million, up 5 per cent on 2018. Higher wholesale prices pushed gross earnings at Scottish Power similarly up to £579 million. The subsidiary’s 2.5GW of installed capacity, predominantly onshore wind, is receiving continued investment, said the group.

But Scottish Power suffered in the retail market, with supply accounts falling to 2.8 million. A shrinkage of its customer base, plus a warmer winter, also saw volume sales of electricity drop 3 per cent compared to 2018.

UK performance was strongest in Scottish Power’s Energy Networks unit. Its gross margin rose 7 per cent to £1.12 billion.

The unit was hit though by persistent faults in its Western Link cable to north Wales, now the subject of an Ofgem investigation.   Output from onshore generation in the Highlands dropped 2.8 per cent on 2018, says Scottish Power’s parent.

Analysts Cornwall Insight this week estimated that prolonged outages from Scottish Power’s Western HVDC triggered £ 31 million in curtailment payments in January alone.

light-bulbs-1875268_1920

Oil giants come together for Teeside net-zero cluster

A major consortium of companies including BP and Shell will help Teeside become the ‘UK’s first’ net-zero cluster.

Announced today (February 28) in Middlesborough, the group will work to accelerate the the Net Zero Teesside project, previously known as the Clean Gas Project.

BP, Eni, Equinor, Shell and Total are the companies involved, bringing experience of carbon capture, utilisation and storage technology. They say they are committed to working closely with the UK government and local stakeholders, including the Tees Valley Mayor and Combined Authority.

The project aims to decarbonise local industry by building a transportation and storage system to gather industrial CO2, compress it and store it safely in a reservoir under the North Sea. They believe the transportation and storage infrastructure will encourage new investment in the region from industries that wish to store or use CO2.

In addition, a combined cycle gas turbine (CCGT) facility with carbon capture technology will provide low carbon power as a complement to renewable energy sources and underpin the investment in the infrastructure.

They believe the project, with government support, could be up and running within five years.

Ben Houchen, Tees Valley Mayor, said: ‘Net Zero Teesside represents the next step in our ambitions for Teesside, Darlington and Hartlepool to become a pioneer in clean energy, driving almost half a billion pounds into the regional economy and boosting the wider UK by £3.2bn.

‘This world-leading industrial-scale decarbonisation project will safeguard and create 5,500 good quality, well-paid jobs for local people. It will act as a beacon for new technologies and further investment as other companies are attracted to our area, while helping the UK achieve its clean energy potential.’

Net Zero Teesside would be the first major development to be based on the South Tees Development Corporation site. The launch event today comes just days after the Tees Valley Mayor struck a landmark deal to secure the land at the former SSI steelworks site and bring it back into public ownership, ready for future redevelopment.

power-poles-252203_1280

Supporting retail market innovation for net zero

Ofgem recently published its Decarbonisation Action Plan. This set out our priorities and the steps we will take as a regulator to help achieve ‘net zero’ at lowest cost. One of those priorities is to accelerate innovation to create products and services that help consumers use energy in ways that supports decarbonisation.

Empowered consumers will be central to fair and effective decarbonisation. Ultimately, a diverse range of products and services need to be made available to consumers, empowering them to change the way they use energy in order to meet and benefit from the net zero challenge.

We’ve been speaking to innovators and investors to understand their experiences and realise we need to continue to adapt our approach to regulation to better enable innovative consumer offerings. This means Ofgem being more proactive and using our existing powers to provide the flexibility innovators need to bring new products and services to market. 

So, what can you expect over the coming months? Our plans centre around: 

  1. the launch of an expanded Innovation Sandbox Service 
  2. extending our ability to provide relief from certain supplier obligations
  3. a more permissive approach to granting supply licences restricted by geography or premises type.

Enabling innovators to test and trial

Testing new ideas allows us and businesses to understand how consumers actually react and respond to new products and services. Yet there are times when it is not always clear whether an idea is possible or not under existing rules and regulations. 

Our Sandbox service was launched in 2017 to experiment with ways of mitigating barriers when innovative plans didn’t readily fit with the rulebook. This includes the BP and Tonik trial of a new platform for trading customers’ small scale exports with other consumers. We now have a much better handle on what kinds of support innovators are looking for, and are expanding our Innovation Sandbox Service

As part of this, we are widening the scope of rules that can be relaxed for innovative trials beyond the Ofgem rulebook to cover some of the main industry codes. This includes the rules for electricity balancing and settlement (BSC), rules around the connection to, and use of, the electricity distribution networks (DCUSA), and code requirements relating to retail energy activities (REC).

We also want to better use derogations from the rulebook so that experimentation, trialling and testing can flourish. This means taking a more permissive approach and we will consult shortly on expanding the number of rules that we can provide relief from. 

Bringing innovative ideas to market

Many innovators have told us that they want to specialise in the products and services they bring to market, focusing on offerings within their expertise. This could include local or regional suppliers, social enterprises focused on vulnerable customers, or those delivering flexibility solutions. To help with this, we’ll be providing greater clarity on when we might grant restricted supply licences – that enable a business to focus on particular geographies or types of premises. We’ll say more on restricted licences and the potential for greater use of derogations to deliver innovative ideas shortly.

Innovators often approach us with ideas that blur the boundaries of the traditional definitions of generation, distribution and supply. These activities typically aren’t prescribed for in law which can undermine the confidence of innovators, investors, and consumers. Many of you think that we should be able to confirm whether a type of activity is permissible (as well as what isn’t), and we agree. This means we’ll confirm to innovators that what they’re trying to do is allowable within today’s regulatory framework, without going as far as endorsing particular business models.

Helping navigate complexity

We’re regularly reminded of just how complex the energy sector can be and we want to help the industry and new entrants navigate this complexity effectively.

Today, we’re outlining our view of how Ofgem and government reforms will help improve the environment for innovation and competition in the retail energy market by 2024. This is accompanied by refreshed guidance on what you need to know, and what you need to do, if you want to sell electricity to consumers

We’ll provide more guidance in other areas as we go forward – including on how longer-term contracts fit with the current rules. And we stand ready to amend or remove rules where these are getting in the way of good outcomes for consumers. We want to work with innovators and industry to help drive innovation so welcome your views and input. 

power-731824_1280

Iberdrola “two decades ahead of energy transition” and making it pay

Scottish Power parent Iberdrola’s 13 per cent surge in group profits to £2.89 billion (€3.4 billion) last year reflects its two decades of steady renewables investment, according to CEO Ignacio Galán.

Galán said its push into clean generation puts Iberdrola “20 years ahead of the current energy transition.”

The group’s full 2019 results reveal a record 2.8GW of new green generation capacity, including East Anglia One’s first turbines commissioned last year. A further 9GW is under construction worldwide.

Iberdrola’s UK activities posted a net profit of £347 million, up 5 per cent on 2018. Higher wholesale prices pushed gross earnings at Scottish Power similarly up to £579 million. The subsidiary’s 2.5GW of installed capacity, predominantly onshore wind, is receiving continued investment, said the group.

But Scottish Power suffered in the retail market, with supply accounts falling to 2.8 million. A shrinkage of its customer base, plus a warmer winter, also saw volume sales of electricity drop 3 per cent compared to 2018.

UK performance was strongest in Scottish Power’s Energy Networks unit. Its gross margin rose 7 per cent to £1.12 billion.

The unit was hit though by persistent faults in its Western Link cable to north Wales, now the subject of an Ofgem investigation.   Output from onshore generation in the Highlands dropped 2.8 per cent on 2018, says Scottish Power’s parent.

Analysts Cornwall Insight this week estimated that prolonged outages from Scottish Power’s Western HVDC triggered £ 31 million in curtailment payments in January alone.

photovoltaic-491702_1280

Millions more homes to be powered by renewables

Details of the next round of the Contracts for Difference scheme, which opens in 2021, have been set out today, Monday 2 March.

This latest round will be open to renewable technologies including onshore wind and solar, with proposals to include floating offshore wind. The scheme will also be changed to facilitate the deployment of energy storage.

Local communities will have a more effective voice on developments that impact them, through proposals for tough new guidance on community engagement for developers of onshore wind across Great Britain, also announced today. They will have a definitive say on whether projects are allowed to proceed. It will remain the case that no English onshore wind project can proceed without the consent of the local community.

The Committee on Climate Change have said that we need to quadruple renewable energy generation in the UK to reach net zero by 2050, and today’s announcement is a step in that direction.

Secretary of State for Business and Energy Alok Sharma said:

Ending our contribution to climate change means making the UK a world leader in renewable energy.

We are determined to do that in a way that works for everyone, listening to local communities and giving them an effective voice in decisions that affect them.

RenewableUK’s Chief Executive Hugh McNeal said:

The government is pressing ahead with action to meet our net zero emissions target quickly and at lowest cost to consumers and businesses. Backing cheap renewables is a clear example of the practical action to tackle climate change that the public is demanding, and this will speed up the transition to a net zero economy.

Today’s consultation outlines proposals to ensure the Contracts for Difference scheme can support the increased ambition required, including:

  • making the UK a world-leader in new technologies such as floating offshore wind, which would allow wind farms to be built further away from the shore and increase clean energy capacity
  • supporting our renewables supply chain to enhance productivity and increase competitiveness, boosting the UK’s world-class clean energy industry
  • improving the scheme to better support energy storage, so projects can provide power when the wind stops blowing or the sun is not shining

This is part of the Year of Climate Action, a defining year for our country and our planet, in the run up to the UK hosting the UN Climate Change Conference (COP26) in November.

wind-turbine-1149604_1920

Western Link HVDC outage caused record constraint management payments as wind power surged

An outage at Western Link HVDC has led to record Balancing Mechanism (BM) payments of £30.9 million, according to Cornwall Insight.

During Storm Ciara and Storm Dennis in particular, wind power has surged with generation from transmission-connected wind topping 6.3TWh.

However, with Western Link out from 10 January to 8 February due to an unplanned outage, 2.2GW of capacity was unavailable and a large amount of wind power had to be constrained. This led to the volume of wind bids accepted in the Balancing Mechanism as constraints to hit a record high of 429.8GWh in January.

Lee Drummee, an analyst at Cornwall Insight, said that the Western Link was specifically designed to accommodate the growing capacity in Scotland and stop bottlenecks such as this, but it has been “fraught with issues”.

“The availability of the link makes a clear difference. For example, December 2019 also saw high wind output of 5.6TWh. However, the Western Link was available in December, so the volume of wind bids classified as system actions on the BM was significantly lower at 247.1GWh.

“Avoiding constraints not only allows more volumes of renewable power to flow onto the Grid but reduces the amount of money that National Grid has to pay to turn off wind farms in Scotland. However, the reliability of the Western Link will need to be solved for its full potential to be realised.”

Ofgem launched an investigation in Western Link in January, looking into National Grid and Scottish Power Transmission’s delivery and ongoing operation of the Western HVDC subsea cable. This comes after it has failed six times since it came online.

The £1.3 billion Western Link was originally due to come online in 2015, but only began operating at full capacity in December 2019.

The high cost of balancing the grid given the surge in wind power and the outage comes after The Times reported that in the first six months of 2020, £55.7 million was paid out in constraint payments, while in the whole of 2019 £130 million of constraint payments were made.

Both National Grid and ScottishPower have defended the transmission system, with the latter arguing that “we are confident that our investment in the link has delivered benefits for consumers since entering service in 2017, and will continue to deliver benefits”.

“We are committed to providing a reliable link that will transport cleaner greener energy to our homes and businesses across Great Britain,” ScottishPower added.

National Grid said that it regularly weighs up the difference between constraint management payments and the cost of building an asset in a “comprehensive cost-benefit analysis”. It continued that to date it is cheaper to pay for constraint rather than build new transmission.

A spokesperson for National Grid said: “We use the electricity generation and transmission assets made available to balance supply and demand second by second, always choosing the most efficient mix to keep costs down for consumers.

“The cost of all the services the ESO uses to manage supply and demand across the system is currently £1 of the average annual household bill of £554. The alternative to constraint payments is building more electricity transmission assets which is more costly, meaning consumers’ bills would rise.”

Increasingly National Grid is looking for new sources of constraint management to balance the grid as renewable sources of power in the UK grow. In December, it launched a Constraint Management Pathfinder RFI, in the hope of adding a new service to its operations, and reducing the cost of network constraints.

“As more onshore wind develops, especially in Scotland, the problems of constraints will need to continue to be actively managed,” finished Cornwall Insight’s Drummee.

electricity-1854093_1920

Vattenfall wins Midlothian Council energy partnership

Midlothian Council, which has declared a Climate Emergency, has appointed Vattenfall as the preferred bidder for its energy partnership

The partnership between Midlothian and Vattenfall will focus on delivering a wide range of energy projects across the area.

This first project is expected to save over 2,000 tonnes of CO2 per year, the equivalent of taking 1,200 petrol/diesel cars off the road. It will be a fourth-generation, innovative low carbon district heating network to the new Shawfair town in the north of the council area on the outskirts of Edinburgh.

The network will benefit from heat supplied by FCC Environment, which operates the councils’ (Edinburgh and Midlothian) state of the art energy from waste facility (EfW) near Millerhill. The EfW is fuelled by residual waste collected by the local councils of Midlothian, Edinburgh and East Lothian.

In addition to setting up a long term ESCo, Midlothian Council aims to sign a 40-year agreement with the ESCo to supply heat to the new public buildings to be built at the new Shawfair town.

The new company will negotiate final contracts with its main initial partners, FCC Environment and Shawfair LLP. FCC will supply the low carbon heat and Shawfair LLP will facilitate the connections to new domestic and commercial developments in the town.

The details of agreements are now being worked up with a view to signing the contract by the middle of this year.

A £20m energy project

This first £20m project will benefit from financial support of up to £7.3m from the Scottish Government’s Low Carbon Infrastructure Transformation Project, which is part-funded by the European Regional Development Fund. The council also benefits from a close working relationship on the project from Scottish Futures Trust.

Future projects to be undertaken by the ESCo will include the potential expansion of the district heating network into areas of East Lothian and Edinburgh, creating a network similar in scale to those delivered in major cities throughout Europe, such as Amsterdam.

The network will bring the latest in heat network technology to Scotland, built as a low-temperature network.

Low-temperature heat networks bring with them many benefits, including lower costs, maintenance, and an ability to adapt to take heat from many sources of waste heat, e.g. sewage works and data centres.

Working with the Coal Authority, the potential for utilising the former Monktonhall Colliery for heat storage and supply will also be investigated.

Projects valued over £100m

Beyond district heating projects the ESCo may be asked to consider Solar PV, Electric Vehicle charging and direct wire electricity supplies to commercial properties. Over the lifetime of the ESCo projects to the total value of over £100m are anticipated.

Midlothian Council’s cabinet member for economic development, Councillor Russell Imrie said: “We’re very excited to be working with Vattenfall to set up an energy services company for innovative new projects benefitting local residents and businesses in the area and setting us well on our way to a carbon-neutral future.”

A sustainable new town

Tuomo Hattaka, senior vice president of Vattenfall Heat said: “We’re delighted to have been selected by Midlothian Council for this long term energy partnership that puts low carbon, fossil-free living front and centre of its ambition.

“Any organisation or company serious about reaching net-zero has low carbon heating at the top of its to-do list, and this energy partnership is no different.”

Mike Reynolds, managing director of Vattenfall Heat UK adds: “Midlothian has an abundance of local, low carbon heat potential which means that we can begin the partnership’s work with the installation of a state-of-the-art heat network that will deliver affordable, low carbon heating to local homes at the Shawfair development.”

Paul Taylor, group chief executive of FCC Environment said: “This news is a hugely positive step enabling, as it will, the use of the heat that the combustion process creates improving yet further the efficiency of the plant.

“Feeding into the planned district heating network on the plant’s doorstep will allow, not just us at FCC Environment, but all parties involved to realise a vision of the future place for Energy from Waste facilities such as Millerhill across the UK.”

light-bulb-4297600_1280

Government launches new business support campaign

The new business support campaign is designed to help businesses in England find out about the full range of available support.

The government has today (17 February 2020) launched a new business support campaign, designed to help businesses to find the right support as part of our ambition to make the UK the best place in the world to work and grow a business.

As part of the campaign, government support will be advertised across a range of media, from billboards and newspapers to radio and social media.

From today, all of the government’s business support schemes will be accessible via the new Business Support site, making it easier for businesses in England to find out about the full range of support available to them. (Business support in Scotland, Wales and Northern Ireland is provided by the devolved administrations so this site covers business in England only.)

Business Secretary Alok Sharma said:

We want to make the UK the best place in the world to start and grow a business. As part of delivering this ambition we are putting all of government’s business support together in one place to ensure more businesses can unleash their potential.

International Trade Secretary Liz Truss said:

We want British exporters to make the most of our status as an independent trading nation, now that we have left the EU. This government will provide the tools and support to ensure these businesses are ready to trade.

How we can help your business

Schemes are divided into 4 areas.

Finance and business planning

Funding for new businesses and support to help existing business grow, dealing with late payments, and equity and debt finance .

Leadership and talent

Mentoring schemes, help with recruiting, developing leadership skills or joining a network.

Innovation and technology

Funding for innovation, adoption of new technology, intellectual property and finding partners for innovation.

Exporting

Support for doing business internationally and expanding online.

More information

The website also provides access to a Business Support Helpline and a LiveChat function. More information about specific schemes in these areas can be found on the website.

thunderstorm-3625405_1280

£90 million UK drive to reduce carbon emissions

Households and businesses will benefit from £90 million to cut carbon emissions in industry and homes.

  • £90 million package announced to tackle emissions from homes and heavy industry – including funding for Europe’s first hydrogen plants which could generate enough clean energy to heat over 200,000 homes
  • local energy projects across the country could reduce housing emissions by up to 80% and save consumers money on their energy bills
  • renewable energy to power industry instead of fossil fuels, removing 3.2 million tonnes of CO2 from the atmosphere by 2030

Households and businesses will benefit from £90 million to cut carbon emissions in industry and homes, Energy Minister Kwasi Kwarteng announced today (18 February 2020).

£70 million will include funding for 2 of Europe’s first-ever low carbon hydrogen production plants – the first on the banks of the Mersey, the second planned for near Aberdeen. A third project will develop technology to harness offshore wind off the Grimsby coast to power electrolysis and produce hydrogen.

Hydrogen is a low or zero-emission alternative to fossil fuels which could power future industry and transport. The investment will also fund projects to trial cutting-edge technologies for switching industrial production from fossil fuels to renewables in industries such as cement and glass production.

The remaining £20 million will be used to fund projects aimed at cutting household emissions and bills through nine UK-wide local “smart energy” projects. Over 250,000 people could have their homes powered by local renewable sources by 2030 – which could lead to their energy bills reducing by as much as half, thanks to this government funding.

If successful, the 10 community pilot projects from Rugeley near Stafford to Coleraine in Northern Ireland could revolutionise local energy generation – allowing local communities to join the frontline in the fight against climate change.

In Rugeley, a coal fired power station is to be demolished and turned into a sustainable village of 2,300 homes. Residents will benefit from thermal storage units instead of traditional gas boilers, enabling them to draw, store and heat their homes with geothermal energy from local canals and disused mine shafts.

In Coleraine, a micro-grid of nearly 100 homes will be established, powered entirely by local wind power. It will help lower household electricity bills by as much as 50% and boost the contribution of renewables to the local energy mix by a quarter.

Visiting the Gigastack project in Grimsby today, Kwasi Kwarteng, Minister for Business, Energy and Clean Growth, said:

Cleaning up emissions from industry and housing is a big challenge but today’s £90 million investment will set us on the right path as we develop clean technologies like hydrogen.

This is an important part of our world-leading efforts in eliminating our contribution to climate change by 2050 while also growing our economy, creating up to 2 million green collar jobs across the country by 2030.

This investment in low carbon innovation will be crucial to help us end our contribution to climate change by 2050.

The news comes just 2 weeks after the Prime Minister announced plans to bring forward the phase-out of coal to 2024 as we continue to ramp up our Year of Climate Action ahead of the UN Climate Change Conference (COP26) this November.

Notes to editors

1. The complete funding package forms part of the Department for Business, Energy and Industrial Strategy’s £500 million innovation fund, which is dedicated to harnessing and rolling out cutting edge technology to fight climate change.

2. Currently difficult and expensive to produce in bulk, hydrogen could be vital in the fight against climate change as a low carbon alternative to fossil fuels used by heavy transport and industry.

3. Of the £70 million being invested in these technologies, £28 million will be for projects developing hydrogen production, including the 2 plants.

4. A further £18.5 million of funding is being awarded to projects developing and trialling technologies to move industrial concrete and glass production away from fossil fuels and onto renewables.

5. The projects have the potential to be scaled up and rolled out across industry, meaning houses and roads could be built using low-emission concrete by 2030. This would prevent 3.2 million tonnes of CO2 a year from polluting the environment – equivalent to taking 679,000 cars off the road.

6. The remaining £22 million of funding will go to top UK scientists and engineers to conduct cutting-edge research into decarbonising industry, focusing on emission-heavy transport and heating.

7. Breakdown of funding:

  • Hydrogen Supply programme – £28 million for 5 demonstration phase projects
  • Industrial Fuel Switching programme – £18.5 million for 4 demonstration phase projects
  • UKRI Local Smart Energy Designs – £21 million for 10 demonstration phase projects
  • UKRI Key Technology Components for Local Energy Systems – £3 million awarded to various demonstration phase projects
  • UKRI Research funding – £22 million for research into challenges in reaching net zero posed by: heating, transport and global fuel markets

8. Hydrogen projects awarded funding:

ProjectLeading bodyFunding received
Dolphyn ProjectEnvironmental Resources Management Ltd£3.12 million
HyNetProgressive Energy Limited, in collaboration with Johnson Matthey, SNC Lavalin and Essar Oil£7.48 million
GigastackITM Power Trading Ltd, in collaboration with Orsted, Phillips 66 and Element Energy£7.5 million
AcornProject Pale Blue Dot Energy£2.7 million
HyPERCranfield University, in collaboration with Gas Technology Institute and Doosan£7.44 million

Find more details of the Hydrogen Supply Competition projects.

9. Fuel switching projects funding:

ProjectLeading bodyFunding received
HyNetProgressive Energy Ltd, in collaboration with Pilkington, Unilever and Essar£5.27 million
Hydrogen Alternatives to Gas for Calcium Lime ManufacturingBritish Lime Association£2.82 million
Switching fuels for cement productionMineral Products Association£3.2 million
Switching Technologies for the Glass SectorGlass Futures Ltd and partners£7.12 million

Find more details of the Industrial Fuel Switching competition projects.

10. Local smart energy projects awarded UKRI funding (more information available from UKRI):

ProjectTown / City
West Midlands Regional Energy System OperatorCoventry
GIRONAColeraine, Causeway Coast and Glens
Peterborough Integrated Renewables InfrastructurePeterborough
Green Smart Community Integrated Energy Systems 2Islington (London)
Zero Carbon RugeleyRugeley
GM Local Energy MarketGreater Manchester
Project REMeDYSouthend
Energy KingdomMilford Haven
Multi-vector Energy ExchangeLiverpool
REWIRE-NWWarrington

the-eleventh-hour-1156792_1280

Water industry hits back at Ofwat over price determinations

Two more water companies have referred Ofwat to the Competition and Markets Authority (CMA) today over its five-year financial plan for the sector, after Yorkshire Water did so on Monday.

Both Anglian and Northumbrian Water have referred the regulator’s price determinations, with the latter claiming that the plan runs “contrary to the long term best interests of customers and doesn’t provide for sustainable investment going forward”.

Anglian’s chief executive Peter Simpson said: “As we do not believe the Final Determination enables us to meet these needs, we are making use of the next step in the regulatory process and asking the CMA to consider if the right balance has been struck between bill reductions and investment”.

Kip Meek, CMA inquiry group chair said, “Everyone needs water, so it’s really important that customers’ bills are not set too high, but at the same time the water companies have enough money to deliver an efficient and high-quality service.

“The CMA will look closely at whether Ofwat’s decision strikes the right balance in this and other areas and will make changes if not.”

Ofwat’s latest financial plan would see companies forced to cut their debt and reduce bills for customers by an average of £50 from April.

Last week it was announced that bills for households will be cut around £17 this year as the new price controls come into effect.

The move is widely seen as an attempt to take on an industry which has come under fire for paying large dividends despite mounting debt, increasing household bills, and being responsible for instances of serious pollution.

The plan would also see companies invest a combined £51bn over the next five years to reduce pollution and leaks.

On Monday Yorkshire Water’s chief executive Liz Barber said the plan meant companies would be “forced to focus on short term performance at the expense of longer term capital investment”.

Although it was widely expected that most of the water industry would challenge Ofwat’s plans, both Thames Water and South West Water – which is owned by Pennon – accepted the determinations.

In a statement, Thames Water said that although the settlement was “most challenging” and would not allow for “essential resilience upgrades”, a “CMA referral would lead to significant management distraction at a time when the company is seeing improvements in customer service and leakage reduction”.

Rachel Fletcher, Ofwat’s chief executive, said that the regulator was “ready to fully engage with the CMA”:

“This price review lays down a major challenge for the sector to transform: introducing a demanding set of new performance targets backed by investment for the future, including £13bn dedicated for the environment and future generations. This is the greenest price review ever.

“We have been clear that shareholders’ rewards will only be earned through a new standard of operational excellence. Some investors have accepted this scale of ambition and change, but others need to face up to the new reality.