INTRODUCTION

  1.  Eastern Group is an integrated UK based energy company comprising Eastern Electricity, which distributes electricity to three million customers, Eastern Energy, which supplies gas and electricity to around four million customers, Eastern Generation Limited, the fourth largest UK generator with 6.7 GW capacity and Eastern Power and Energy Trading an energy wholesale and risk management business.

  2.  Eastern's Networks business has a long-term vision of providing an interruption free network for its customers which can only be achieved through technical innovation. Eastern Generation's profitability depends on maximising plant efficiency and availability whilst complying with environmental legislation. Eastern therefore has considerable vested interest in the application of state of the art technology cultivated through research and development in the engineering sector.

REGULATORY FRAMEWORK

  3.  The Director General of Electricity Supply (DGES) is responsible for regulating the UK electricity industry through the Office of Electricity Regulation (OFFER). The DGES has a secondary duty "to promote research into, and the development and use of, new techniques by or on behalf of persons authorised by a licence to generate, transmit or supply electricity". This is one of the responsibilities of OFFER's Technical Director but is a low key activity. Eastern concurs with this approach and does not believe that it is a relevant role for an economic regulator. The present regulatory formula does not provide any specific incentives or require separate expenditure on R&D although it incentivises business efficiency through the RPI-x formula and improved network performance through the Guaranteed Standards and the publication of actual network performance.

EASTERN'S APPROACH TO R&D

  4.  Eastern generally employs only proven technologies in order to comply with network reliability standards and to provide a high level of generation availability. State of the art technology, e.g. hot glove working, pole-mounted auto reclosures and improved lightening protection equipment, has been adopted to improve network performance. In seeking new technologies and innovative techniques for network design, development, construction and maintenance Eastern generally relies on the manufacturers for product development. However Eastern believes it important to work alongside manufacturers to develop improved products and participates in appropriate technology transfer schemes e.g. development of pad mounted substations and metering technology. The introduction of new specialist IT systems and diagnostic inspection techniques has improved fault-finding and monitoring of the network. New products are assessed as they reach the market place.

  5.  Eastern also invests directly in technology research and development through several establishments (e.g. EATL, ERA and Strathclyde University) based upon its strategic business needs as defined in the Distribution Business which links all business drivers with network activities. This process includes a gap analysis where the plan identifies operational requirements that current techologies cannot deliver and enables Eastern to focus its research activities. However, in common with most other RECs, Eastern does not provide significant funding to develop new products and processes in any engineering field which is outside our core expertise.

  6.  Eastern no longer contributes to research into end use technology for electricity but focuses on providing innovative solutions and bespoke service packages to its industrial and commercial customers to improve business performance and reduce operating costs. This includes the testing and demonstration of process techniques and identification of the most appropriate technology at Eastern's Industrial Energy Efficiency Centre.

  7.  Although Eastern has not taken advantage of any UK Government funded programmes it is involved on European funded projects, including joint collaboration.

SUMMARY

  8.  Eastern embraces the philosophy of using state of the art technology and is actively involved in the transfer of new technology that improves business performance and is required by its customers. To this end Eastern has recently established a Technology Transfer Unit. However research is not a core activity and is best undertaken by dedicated research institutes and manufacturers. Businesses operating in competitive markets will continue to demand innovative solutions, improved technology and new products to facilitate growth. Manufacturers will provide the solutions that the market demands.

  9.  Eastern believes that the Government has a role in developing "blue-sky" technology that would benefit UK plc rather than individual companies. This must be prioritised and focused on specific activities which the Foresight Programme aims to achieve. Collaboration between public and private sector organisations should be maximised for all Government funded projects which must be tightly managed with appropriate review stages. UK organisations should be actively supported and encouraged to take advantage of available EU funding. An appropriate framework for the subsequent dissemination and promotion of new technological applications and best practice within the market is desirable.

11 March 1998