Risky business

The length of the risk register on the boardroom agenda of the UK’s utility companies is not getting any shorter. But what are the big talking points? Utility Week Intelligence brought industry figures together to find out.

Political and public backlash against paying for the cost of net zero, staff vulnerabilities compromising security, and the need for greater government support to prevent hostile states shutting down vital infrastructure – all these emerged as pressing concerns in a roundtable discussion on the risks to utilities’ business operations. The event was organised by Utility Week Intelligence in association with Marsh McLennan.

The discussion was framed around interim findings of the forthcoming Utility Week Intelligence Risk Survey. It was attended by senior people from across networks, water and energy retailers, and representatives from Marsh.

Here are some of the key talking points:

No steer on how to decarbonise the grid

Kicking the debate off, the director of a network company raised the perennial problem of lack of clarity around policy. He reported this situation was becoming more acute every year that the industry moves closer to the 2035 deadline for transitioning to a net-zero grid. “On the one hand, we have a very clear policy statement and ambition, which is great because it does provide certainty and clarity.

“On the other hand, we are stuck with market-led processes and decision-making.”

This meant that there were gaps emerging in the delivery of vital components needed to provide a whole system. “If we don’t have enough long-term storage on a day where there is no wind, we will be absolutely screwed,” he noted.

Cybersecurity threats grow

Geopolitical tensions have stoked the threat of cyber-attacks. “It’s only a matter of time until one of the utilities suffers a significant attack,” said one participant, pointing out that they were continually having to seek additional funding to manage the cybersecurity aspect of their business. “I think when it comes to resilience against the most capable ‘threat actors’, we’re going to have to think about impact reduction, not just continuing to spend more and more trying to prevent something that eventually is going to get through,” they said.

There was also a conflict in the policy to make more data open to other participants within the market. “How do you do that in a way that maintains security and resilience? Because as soon as you put something on a website or a portal, even if you require a login, you have got no control over who is accessing that data,” commented another participant from a network.

Affordability and the threat to net zero

Energy prices have come down, but energy retailers around the table said that people not being able to pay their bills was nevertheless having an impact on their own financial resilience. Lack of affordability would inevitably fan out into growing mistrust and backlash against net zero.

“I don’t think it is very easy for government or the regulator to take the decisions they need to go for net zero, because they are so focused on worrying about the cost-of-living crisis and affordability,” said one participant.

They added: “It also has a massive impact on the reputation of the sector. We know that customer satisfaction in the energy industry, and I suspect in the water industry as well, has plummeted. We can see from our customer service data that our people are answering the phones quicker, they are answering emails quicker.

“But customers don’t like their water or energy company if they can’t afford their bill, or if that bill is taking up an ever-increasing proportion of their take-home pay.

“I feel if we don’t sort this out and find an affordable way to provide people with essential services, affordability will be a continued drag on the industry’s ability to get to net zero.

“Wholesale prices are starting to ease, but the problem could flare up again at any point. There are also other costs coming down the pipeline that will need to be put onto customers’ bills.”

Pylons: The new combined sewer overflows?

The water industry grapples constantly with public outcry over sewage being poured into waterways from overflows when there is a storm. But the networks could be the next in line to feel the public’s fury as new infrastructure is built to boost grid capacity. “We’re already beginning to see a similar kind of public backlash against pylons in some parts of the country,” commented a participant.

“I think we should be leaning into these issues and figuring out ways around them – Including how to build less network to get to net zero if we can.”

Another attendee pointed out that the move towards populist governance was happening in all parts of the world. This was replacing a proper national conversation, which in the case of pylons meant pointing out that building more infrastructure was the trade-off for meeting net zero.

Social media is an opportunity to build trust

The perils of social media, and particularly the way it can spread misinformation, have rapidly become a bugbear for many firms in the sector. But one participant took a more robust view. “Social media is a fact of life – people are more likely to complain on Facebook than via email or phone. We have to lean into that and see it as an opportunity to build trust and look after customers.”

Staff may be vulnerable to bad actors

A worrying trend according to some in the group was the targeting of staff by bad actors looking to steal passwords as a way of compromising IT systems and data. Said one: “When we’re looking at technology risks, we can fix the hard elements of it, but actually, our people hold many of the keys. It’s really important that we don’t just think of cost of living as something that’s affecting our customers, because many of our colleagues are potentially exposed for the very same reason.

“Some people will have very complex personal lives, and are finding themselves in situations where they can’t pay the bills, and they may well be tempted to do things that they wouldn’t have done previously.

“And because utilities are increasingly the bad guys, the traditional loyalty staff feel to their employer is weakened. Taking a few things to sell on, or handing over a password, is seen as being less of a big deal than it perhaps would have been in the past.”

Want more? The full findings from our research with Marsh on risks facing utilities and how they break down by sector will be published by Utility Week Intelligence later this month.