18th May 2009 energynetworks.org 1 A PRESENTATION BY ERIKA MELÉN OF THE ENERGY NETWORKS ASSOCIATION Report from the ENA/ERA Theft of Energy Working group

18th May 2009 energynetworks.org 2 Background Theft of energy is defined as: “a convenient term to cover interference with a gas or electricity meter and/or associated supply equipment to avoid or reduce the true payment for energy supplied” The group comprised of members from GTs, DNOs, Supplier, Meter Operators, Ofgem, ERA, ENA and UKRPA with consultation from Elexon, energywatch and small suppliers The group presented their initial findings to Ofgem in April 2006

18th May 2009 energynetworks.org 3 Obligations on Industry Parties Gas Suppliers: Suppliers are required to notify the relevant transporter of any case of actual or suspected theft as per SLC 16 of the Gas Supply Licence. This condition also requires the supplier to provide information reasonably requested by a relevant transporter for the purpose of preventing or detecting the taking of an illegal supply of gas and to investigate suspected cases when asked to do so by the transporter. SLC 17 obliges suppliers to use reasonable endeavours to ensure that meters are inspected at no more than 2 year intervals

18th May 2009 energynetworks.org 4 Obligations on Industry Parties Gas Transporter: Where it appears to the GT that a person has, or may have, taken a supply of gas in conveyance or a supply of gas at any premises, the GT is required to investigate the matter, and subject to the outcome of the investigation, use its reasonable endeavours to recover the value of gas as per SLC 7 of the Gas Transporters Licence.

18th May 2009 energynetworks.org 5 Current Incentives Gas Transporter: There are currently no incentives on GTs apart from gaining a reduction in shrinkage Gas Supplier: Suppliers are incentivised through the Reasonable Endeavours Scheme through which they can recover some of their costs if they have taken all the necessary steps of the scheme but cannot recover all or some of their costs from the customer

18th May 2009 energynetworks.org 6 Group Recommendations The Supplier Licence Conditions 16 and 17 are very wide and should be reviewed Further consideration to be given to a uniform approach being adopted for gas and electricity Incentives should be reviewed as the current ones do not provide economic reasons for optimal behaviour by industry participants Ofgem should seek views on the suggested incentives through consultation. Following consultation, Codes of Practice (to include appropriate reporting and monitoring arrangements) should be adopted by the industry including IGTs and IDNOs and placed into industry governance Xoserve should continue with its work on the theft of gas process to encourage suppliers to deal with theft within the set timescales

18th May 2009 energynetworks.org 7 Gas Incentive Recommendations Extend the current Reasonable Endeavours Scheme for gas Simplify the current administrative process of claiming Allow claims to cover the cost of site visits - with rules in place to validate claims and a cap on the number of claims made It is recommended that a cap is kept in place for the investigation cost claims but that the level of the cap should be reviewed based on existing cost data analysis

18th May 2009 energynetworks.org 8 Gas Incentive Recommendations Introduce a Supplier Energy Theft Scheme Compare Supplier revenue protection activity, based on their market share of theft investigated, and to reward them according to performance. If the percentage of thefts detected by a supplier is greater than the market share the supplier will receive a credit; if the percentage is lower the supplier will receive a debit. Self-financing scheme with poorer performers subsidising better performers. Implemented in two stages – firstly a 12 month data collecting stage. These figures will then be used to set 12 month targets going forward.