50 days with coronavirus: the story so far for UK utilities - Utility Week 50 days with coronavirus: the story so far for UK utilities - Utility Week

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On 31 January 2020 the first two cases of coronavirus in the UK were confirmed. Two Chinese nationals staying at a hotel in York tested positive for the disease and were whisked to a specialist unit for treatment of infectious disease in Newcastle. Meanwhile, the first flights repatriating British nationals in China returned to the UK, with passengers placed under quarantine.

Few would have imagined then that 50 days later, we would be operating in a world where schools have closed to all but the children of key workers, supermarket shelves are being continuously ravened by panicked consumers seeking to stockpile for the seemingly inevitable scenario of extended self-isolation in their homes, and the UK economy – now largely functioning from the kitchen tables of home-based workers – is experiencing conditions which have never before been seen outside a time of war.

Over the past few weeks, Utility Week has been closely following the escalating responses and concerns of companies operating in the UK’s energy and water sectors as they attempt to protect business continuity and resilience in these unprecedented times.

In this report, we review some of the key themes and stories which have emerged and consider some of the challenges yet to come. As the story continues to unfold, Utility Week will go on providing insights and updates on a rolling basis, as well as delivering weekly summary reports and webinars on key developments.

All of our latest coverage of the coronavirus outbreak and its impact on UK utilities, can be found here.


The end of the world as we know it: enacting resilience plans

Following the first confirmed UK cases of coronavirus, the march of contamination took steady hold throughout February and by the start of March it was very clear that the UK could not hope to avoid severe social and economic disruption due to the disease.

Reassuringly, this was not overlooked by operators of critical national infrastructure who were quick to trigger resilience strategies.

In early March, United Utilities spoke to Utility Week about its move to enact a “well-rehearsed” pandemic response plan for real for the first time. Meanwhile, other water companies also said they were “dusting off” pandemic contingency to ensure lifeline services – and the ability of consumers to perform all-important hygiene routines – continues without interruption.

Likewise, the Energy Networks Association issued a message on behalf of the nation’s gas and electricity networks to assure that “well-tested” contingency plans including “mutual-aid arrangements” whereby networks will share workers and equipment are kicking into action across the industry to make certain that services do not fail.

Given that water and energy networks are used to delivering emergency response to extreme weather events, their confidence in pressing all hands to the pump is perhaps unsurprising. Unlike much of the rest of the UK workforce, many workers at monopoly energy and water companies will have previous experience of being asked to suddenly perform roles which fall outside their day to day functions in the interests of the greater good.

This said, the current coronavirus scenario does present challenges which are unlike weather-related emergencies.

Workforce strain

For instance, and perhaps most obviously, there is the very real prospect that critical national infrastructure owners will find their workforces significantly diminished as workers are forced to self-isolate. And this impact will be universal, meaning a network in one region will not necessarily be able to rely on the “mutual-aid” of others as is the norm in storm and flooding events.

There may also be segments of the workforce that responsible employers must steer clear of deploying into situations where social contact is a likelihood – in a sector with a significantly older demographic, especially in key engineering functions, this could cause further strain on workforce availability.

Then too there is the fact that, unlike in extreme weather scenarios companies are not currently focussed on returning supply to customers, but on mitigating the chances of failure during a period of significantly altered demand dynamics.

This is especially the case for water companies, as Waterwise managing director Nicci Russel highlighted when she spoke to Utility Week, also in early March.

Russel warned of an inevitable spike in water demand due to increased hand washing during the outbreak. An average hand wash lasting for the government recommended two minutes could use as much as two litres of water a time, we learned.

For water companies with a generally incomplete knowledge of per capita consumption at the best of times, the impact of this increased usage over a sustained period is difficult to account for. What’s for certain, is that it runs counter to an ongoing need to engage consumers in significant demand reduction in the face of increasingly urgent water shortage challenges across the south of the UK.

Meanwhile, in the energy networks space, on the same day the ENA issued its confident message on emergency response, one network director who did not want to be identified told Utility Week that companies urgently need to understand how this particular emergency will impact their ability to deploy workers on key operations and maintenance activities.

“We are prepared for a stage where the country is in lockdown,” he said. “But we need Ofgem to be very clear about what they expect from us in this very unusual situation.

“For instance, if we get to a fullblown pandemic status, we would want to focus on sending workers out only to jobs where they are keeping the lights on. But we need to know that we’re not going to end up in some inquiry because we didn’t do such and such that the licence stipulates.”

And it’s not just the regulator’s position on enforcement of licence obligations during a state of emergency that monopolies want clarity on.

Regulatory disruption

From water companies preparing for the start of a challenging new AMP period in April and networks in the throes of the RIIO2 price control negotiations, questions are being asked about whether they will be held to testing ramp-ups in performance and whether timelines for consultations and final determination will remain in place as planned.

Water company bosses have indicated that their dialogue with the regulator so far on this matter has been “reassuring” and shortly before this report was published, Ofwat chief executive Rachel Fletcher issued a public statement to confirm “for the avoidance of doubt” that incentives and penalties “should not get in the way of effective prioritisation in the interests of customers”.

Similarly, Ofgem has moved to approach to RIIO2. On 17 March, Ofgem confirmed to Utility Week that open hearings which had been due to take place in March and April as part of the RIIO2 process have been cancelled while the regulator considers alternative options – such as digital hearings.

A couple of days later, new chief executive Jonathan Brearley issued a more fulsome statement on the “pragmatic” approach Ofgem will take to regulation while the nation squares up to the coronavirus crisis. This included a hint that further changes to the timeline and methods of engagement for the RIIO2 process are likely to be forthcoming.

Brearley’s statement also referenced the regulator’s expectations of energy suppliers in the context of this pandemic. Quite rightly, he emphasized that the regulator’s focus for monitoring compliance among retailers will be on ensuring that companies are taking actions to “protect consumers from immediate harm, particularly vulnerable customers or where customers are at risk of going off supply.

“Where companies can demonstrate that any compliance issues have resulted from prioritising efforts to protect customers and security of supply,” he added, “we will take full account of this in any decisions we take.”

Supporting customers

Of course, since the seriousness of the UK outbreak began to become clear, a variety of energy suppliers had already moved to assure customers suffering from the widespread economic fallout that they needn’t immediately add their energy bills to their list of worries.

EDF Energy was among the first to say it will consider delayed payments for customers affected by COVID-19, getting ahead of guidance from Ofgem on taking a “proportionate” approach to debt collection under the circumstances.

But while statements like these send the right noises to worried consumers, one supplier chief executive frankly told Utility Week they will quickly be shown up as “meaningless” unless significant and targeted government support is made available for those struggling to pay their bills – “either that, or a lot of suppliers will go to the wall,” he warned, adding that measures introduced by government to cease disconnection of prepayment meters would be very hard for suppliers with large prepayment customer numbers to bear.

While suppliers continue to operate however, they also continue to be responsible for fulfilling their responsibilities within the national smart meter rollout – a programme which has generated significant speculation in the last week.

On 11 March, the energy systems data services company Electralink warned that “public health concerns might mean fewer installations in the coming weeks,” despite a rollout trajectory that would otherwise expect a significant ramp up in installations during the same period.

It’s a logical conclusion to draw given the advice that government has issued on home working and reduced social contact except in cases of absolute necessity, and some industry leaders have even suggested that an official halt should be called to the smart meter programme while such guidance is in place.

Other market participants disagree however and have argued to Utility Week that proactive suppliers can find ways to press ahead with installations – perhaps even increasing their success rates with first time install visits while so many consumers are now working at home.

One supplier CEO even said that they had invested in hazardous material suits for meter technicians – not only so that they could act to ensure any vulnerable or infected customers with supply problems were reinstated as swiftly as possible – but also so that smart meter installations could go ahead.

It’s hard to imagine consumers being comfortable with hazmat-suited meter technicians entering their homes, but many previously difficult to imagine scenarios have already come to pass in recent weeks.

This round up of cronavirus developments for UK utilities appears in the 20 March issue of Utility Week. Read the digital magazine here: https://read.utilityweek.co.uk/

Challenges in limbo

Events in this unprecedented crisis are unfolding fast and many utilities – like the population at large – are struggling to make sense of which each development means for them.

Challenges for companies to get to grips with during this surreal period range from overcoming remote working problems for employees, to understanding impacts on important planned maintenance regimes for infrastructure and the outlook for major industry programmes – like smart metering – which require contact between utilities personnel and the general public.

For energy and water retailers there are also some very live concerns around cash flow and their ability to continue collecting from businesses and consumers who may have been suddenly thrown into financial meltdown due to government measures to contain the spread of COVID-19.

Key workers?

As this article was published however, the number one issue that utilities were looking for answers on was the designation of employees as key workers, so that their children could benefit from continued schooling and school care during the working day.

One water company chief executive told Utility Week that clarity on this was “paramount” to maintaining confidence in continued supply – with more and more employees being forced to self-isolate, lifeline service providers simply cannot afford to have further reductions to workforce availability due to childcare challenges, he explained.

Another major issue occupying the minds of a range of sector leaders, is the timeline for making coronavirus testing technology available to utilities – both in terms of tests for individuals currently carrying the virus, and those that may have contracted it and subsequently recovered or been asymptomatic.

Again, a water chief executive told us that the ability of his employees to return to work with confidence after experiencing coronavirus symptoms is “critical to maintaining public health”.

On a more mundane, but nonetheless important issue, Utility Week heard from industry expert and former regulator John Scott that energy networks will be beginning to consider how to alter their regular summer maintenance regimes without impacting network resilience.

He explained that networks generally begin an annual process of planned maintenance after the switch to British Summer Time – which this year falls on 29 March – which includes taking key equipment offline.

However, he warned: “If you start depleting the network and then you have critical staff shortages it might be harder to return equipment to service quickly if there’s a problem.”

Meanwhile, many technology vendors have been vigorously extolling the benefits that advanced condition monitoring solutions and equipment automation can now demonstrate to companies who need to deploy field workers with the utmost care and avoid all but the most critical of maintenance operations which require equipment to be out of service.

Challenges for utility retailers

While infrastructure owners figure out how to keep kit in good shape, potentially without recourse to traditional maintenance options, some energy retailers are struggling to keep lines of communication open with their customers, causing one supplier chief executive to accuse peers of “giving up on customer service” in the midst of this national crisis.

The CEO claimed that some market participants are turning away customer calls, telling them not to get in touch unless in an emergency. Such cases provide a notable contrast, he said, with other more culturally and technologically forward-thinking suppliers who have long since had in place the capability for contact centre agents to pick up queries from home.

The technology laggards are all too likely to cause consumer detriment, the industry leader implied, since a rapidly increasing volume of customer contacts to his own organisation are from customers requesting delayed bill payments due to temporary or permanent loss of income. At a rough estimate on 18 March, he thought that five per cent of incoming contacts already fell into this category. An ominous indicator of the numbers likely to be seen in the coming weeks and months as the nation’s economy is necessarily suppressed in the interests of overcoming the spread of disease.

With many energy retailers operating at a loss in normal market conditions, moving with agility to upgrade organisational IT to support distributed contact centre operations will be a tall order. Acting swiftly to institute split-workforce routines – for example whereby half the workforce works from home and half from the office on a rotating weekly basis – is an alternative measure which can keep operations ticking. Indeed, early anecdotal evidence from more than one company suggests that productivity and performance could actually increase under such working patterns.

With or without the help of technology of flexible working patterns however, there are many market experts who expect coronavirus to trigger a new bout of supplier failure in an already fragile marketplace.

A worry for some commentators, is that such a scenario could cause the supplier of last resort (SOLR) mechanism – which has served consumer well in the past couple of years – could falter, primarily because, with companies straining to maintain service levels for their existing customers, it could be harder than usual to find suppliers willing to put up their hands to take on new customers.

As a senior industry source explained, the SOLR process can represent a major strain on human and financial resources, which companies in the current climate would be reluctant to risk. Suppliers would also be cognisant of the fact that customer coming on board during this especially worrisome time would expect rapid responses to queries and concerns. “Usually in a SOLR scenario you can say ‘hang tight’ we’ll get everything straight for you within a few weeks. In this context, customer would be wanting you to reconcile everything for them within the day,” they said.

Of course it’s not only domestic customers – or their utility providers – that are worried about the immediate and longer term impacts that measure to contain the spread of coronavirus will have.

The B2B energy supply market, usually significantly more robust than its B2C counterpart is heading into undeniably rough waters. Despite government assurances of support for businesses effected by its measures, companies are already going to the wall.

Meanwhile, many of those bidding to survive are ramping down operations. The inevitable upshot is that B2B energy retailers – and indeed players in the non-domestic water market where margins are wafer thin – will and up “screwed on bad debt and screwed on demand volumes” as one senior industry figure put it.

With a minimum of 12 weeks of economic lockdown stretching ahead, many utilities are in an excruciatingly uncomfortable time of limbo.


The new world order: what comes next?

While individuals and organisations reel from one day to the next, many are already asking what the world will look like once we have “turned the tide” of COVID-19, as the prime minster has said he is confident we will do.

To try and answer this today would be foolhardy. While the UK’s first 50 days with the virus may feel like a lifetime in terms of the significant changes seen in our working and personal lives, there is still a long story of radical government action and industry impact to play out in this crisis.

The effects of these next moves on the resilience of utilities and the communities they serve could be enormous.

What is certain though, is that many in the utilities industry already harbour worries about the impact that this all-consuming distraction will have on the UK’s progress towards its net zero emissions commitment and the availability of capital to invest in a monumental overhaul of national infrastructure.

And, on a more positive note, that coronavirus will leave the utilities sector a far more flexible and technologically confident industry than it was before, as all organisations are forced to designate greater autonomy to employees and maximise the value of tools for flexible working and remote or automated control of assets.

As the industry embarks on its next 50 days, at least, of coronavirus war-footing, there is no doubt that many more far reaching consequences of the outbreak will emerge.

Further coverage of the short and long term impacts of coronavirus on UK utilities will be available daily on Utility Week’s website.


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