Government growth policy, obscure company governance and “nerdish” regulation came in for criticism from regulatory veteran Sir Ian Byatt last week.
In a wide-ranging speech to a Regulatory Policy Institute conference on the future of independent regulation, the ex-director general of Ofwat called for a “much more sceptical approach” to growth projects.
Drax last month became the first to benefit from a government infrastructure guarantee to support financing of its biomass conversion project. The Thames Tideway Tunnel and Hinkley Point C nuclear power plant are among the utility projects tipped for similar support.
Sir Ian raised concern that such support was being waved through with insufficient scrutiny. “Project appraisal of the old-fashioned kind has gone out of the window,” he said. “The focus is too much on financing projects for which the investment case is uncertain, rather than considering whether they are value for money in the first place.”
The Tideway Tunnel was also cited in an argument to consider imposing controls on utility company dividends. The influx of private equity into the water sector, in particular, has led to “very complex and not at all transparent” governance, said Sir Ian. “They have also been paid very large dividends, which call into question the strength of the ring-fence around utility obligations.” In Thames Water’s case, that has made its investment position “quite difficult”.
Meanwhile, regulation has become increasingly complex and technocratic, he said. “It has been exacerbated by nerdish schemes such as menu regulation. I don’t understand these schemes and I’m sure I’m not the only one.”
This article first appeared in Utility Week’s print edition of 3rd May 2013.
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