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There was universal acceptance from everyone we spoke to that something needs to change – from tackling the legitimacy deficit and addressing vulnerability, to empowering utilities more as they navigate massive technological challenges and the rising regulatory agenda of fairness.
But the challenge, also agreed by all those we spoke to, is ensuring that any pledges are not overtly onerous on industry but have a robust authenticity with the public and policymakers. Only by achieving this can they be credible and effect genuine change.
Phase two
As part of the next stage in the campaign, Utility Week aims to facilitate a high-level roundtable discussion with industry players and parliamentarians about the potential social contract pledges we have heard from those within the sector, along with where to go from here.
We also aim to submit our findings to the National Infrastructure Commission’s regulatory review, and the government’s expected Future of Energy White Paper call for evidence later this year.
Campaign support
Our suggested social contract themes (see ‘Potential Pledges’ below) have resonated strongly with many we have spoken to, including co-author of December’s key energy industry report on “ReShaping Regulation”, Laura Sandys.
With the arrival into the energy system of so many factors unanticipated five years ago, says the report, regulatory architecture must change, and energy policy must “wean itself away” from trying to design a “silver bullet” solution.
As the sector shifts from “a linear supply-driven system to a diverse, distributed and dynamic market”, it says, the change from a “command and control” system design “must resist embedding any specific element of the current regime that is not fit for purpose”. “Instead, it must promote the significant and productive opportunities from the new and rapidly changing shape of the sector. A different set of principles and approaches to regulate the dynamic changes is required.”
Speaking this week, Sandys, who has also championed an Energy Data Taskforce, endorsed our New Deal for Utilities initiative as a valuable exercise in assisting the debate: “I think it’s been a very forward-looking campaign. And quite a brave thing – you’ve looked to really push the boundaries on what I would call business as usual. You have got lots of people to articulate. Now it is about getting them to do something more.”
Our next stage discussions are something Sandys says she would be delighted to take part in, to help support the sector to lead the charge for the future. “I would say the sector is now catching up with the public mood. But it needs to go further – to start setting the agenda, rather than have sometimes the agenda imposed upon it.”
Also welcoming the campaign findings this week, former regulator Maxine Frerk, director of Grid Edge Policy, said it was now very important the industry knew the problem it was really trying to solve, rather than simply reacting by changing structures. For example, she would not necessarily be in favour of a large multi-regulator as has been mooted by some.
“Lots of other questions need to be asked first about where regulation is going. We do need more working across utilities but there’s lots of ways we could achieve that, through more incremental change. And there are lots of questions around the role of the regulator versus government, which is not very clear. We also need to ask how you get more of a consumer voice into some of the big policy debates.
“I think a discussion group could certainly look at this and take these things forward. I think the campaign has been a useful exercise. It’s been an important debate which I’d like to see continued.”
Water UK chief executive Michael Roberts said Utility Week’s campaign has been “a valuable addition to the debate about the future of our sector”. “It comes at a time when the water industry is actively considering how best we express our special position as responsible businesses delivering an essential public good. And while the New Deal for Utilities campaign may be wrapping up, the issues raised will continue to be an important part of the ongoing debate.”
David Smith, chief executive of the Energy Networks Association, said our campaign had “got to the heart of an important set of questions the utilities sector is facing”.
“As our energy market continues to change and the public come into more direct contact with that change, then that will only increase the need to answer those questions.
“We should never lose sight of the fact that we are private companies delivering a vital public service. That philosophy runs through the veins of those people responsible for keeping our lights on, our homes warm and our businesses running. It’s made Britain’s energy networks the success story they are. It’s important we find the right message to get that across to the country.’
Sustainability First’s Sharon Darcy (see column, right) has been doing a lot of work over the past three years in this space, including taking a broader look at “the future of the corporation”
“Some really important things appear to have been drawn out in the New Deal campaign.
“Our concern in all of this is that all the talk around social contracting remains just talk. Potentially that is quite risky because you’re raising people’s expectations if you don’t then follow through in terms of how that’s embedded in company behaviour.”
Industry reaction
Chris Loughlin, chief executive , Pennon Group
“Utility Week’s New Deal for Utilities campaign raised some interesting and crucial questions about the role of utilities in society and how best to meet rising customer expectations.”
Colin Nicol, managing director, Scottish and Southern Electricity Networks
“The campaign has been important, both in the way it has shone a light on the public perception issues we face as an industry and, more importantly, in helping share views on how we can best address these challenges, collectively and with purpose.
“Given our position as providers of an essential public need, this will be a debate for the long term. It’s therefore essential we keep up momentum – ensuring our words are matched by clear actions that recognise our privileged position and drive continued delivery in the public interest.”
Abbie Sampson, director of external affairs, Energy UK
“As we transition to a low-carbon, flexible future, we must ensure energy works for all, including the most vulnerable, so it is right this campaign is looking at these areas – it’s something the Commission for Customers in Vulnerable Circumstances, and our own Future of Energy project, have been looking at too. They are both due to report shortly.”
Gillian Cooper, head of energy policy, Citizens Advice
“The New Deal for Utilities has demonstrated that energy and water must address the legitimacy gap as a matter of urgency. Regaining the trust of customers is critical.
“Technology and how consumers use technology is changing at a rapid pace. Government, regulators and companies need to be thinking about how to make existing consumer protections fit for the future.
“Good consumer outcomes will be central to this. Regulators and firms must now demonstrate that consumers are at the heart of everything they do. This means people being able to access genuinely independent advice and support when things go wrong.
“Value for money is also key – essential services must be accessible at a fair price.
“Ofgem has a chance to put a marker down. By limiting the excessive profits of networks it can deliver a fair deal for households.”
NEW DEAL – POTENTIAL PLEDGES
What we heard from industry was a widespread acceptance of the importance of:
- sharing rewards, as part of a concerted effort to build stronger trust and improved communications with the public and push further on diversity.
- greater corporate transparency, including about performance-related executive pay.
- delivering on resilience, such as leakage and service levels.
- more protection for customers, including those in vulnerable
situations. - progress on environmental and sustainability targets.
In return for meeting such a charter, utilities would need to see:
- more cross-utility collaboration
- fit for purpose market mechanisms.
- considered, clear and future-proof regulatory reform offering
sufficient freedom for monopoly businesses to adapt in their own
way and to continue to attract investment. - clarity on government policy direction and an honest debate over planning for long-term challenges.
- a recognition of the significant operational challenges facing
utilities (such as extreme weather and climate change). - support for utilities facing huge technological transformation,such as access to data on EV charging, improved broadband for all in terms of smarter home energy.
Get in touch: For more details or to comment on or discuss any of the issues further, please contact Utility Week editor suzanneheneghan@fav-house.com