Utility of the Future: Strength in numbers

What wisdom can the likes of Ofcom and the Pensions Regulator bring to utility regulation? Denise Chevin asks Emily Keaney, director of the umbrella organisation the UK Regulators Network.

Since its formation in 2014 it’s fair to say that the UK Regulators Network (UKRN) has had a low-key presence in the utility sector. So, when the spotlight was trained on it in the National Infrastructure Commission (NIC) report on regulation in energy, water and telecoms, in October, it would have been the first most people in utilities would have known about it. But behind the scenes, the collaboration body that brings together senior officers from 13 industry regulators has been quietly benchmarking and sharing approaches on key areas like the cost of capital and vulnerable customers. In fact, the UKRN has played a key role in the proposed nationwide rollout in spring 2020 of an initiative to share information about customers on the priority services register between energy and water companies.

The NIC rejected suggestions from some quarters to bring water and energy regulation under one umbrella. Instead, its report Strategic Investment and Public Confidence recommended the UKRN “be given a stronger leadership role through the appointment of an independent chair to promote collaboration and coordination, and ensure markets continue to deliver for consumers”. Its rationale was that an independent chair of the UKRN would help challenge regulators to expand the ambition of their coordination, and identify best practice for other members to emulate.

In an interview conducted before the election was called, UKRN director Emily Keaney is noncommittal on the NIC viewpoint. “Generally, the NIC report had a twin focus on consumers and on the economy and investment, and that’s really sensible. It mirrors the approach we’ve taken. But it was a review of three regulators – Ofcom, Ofwat, and Ofgem – and we have 13 members. So we just need to take those recommendations back to all 13. There’s some really interesting things for us to discuss, but given the width of our membership it’s still too early to say anything definitive about how we’re going to take it forward.”

The group is certainly diverse, ranging from finance to infrastructure. The two newest members are the Information Commissioner’s Office and the Pensions Regulator. There is a staff of nine, all seconded from their regular day jobs and housed in the offices of the Civil Aviation Authority. Keaney comes from Ofcom, where she was head of Ofcom media literacy research, and ran Ofcom’s children’s media research programme. The CEO position – effectively a chair role – rotates among the membership. At the moment it’s the turn of Jonathan Oxley, who is interim chief executive of Ofcom.

The UKRN was set up in 2014 by a core group of regulators. The full CEO group meets twice a year, and there are also many other meetings underneath that.

“We have a lawyers’ network, we have our HR directors’ network, we have our chief operating officers’ network, we have a cyber-security network and a data strategy network. All different aspects of the organisations are sharing how they do regulation, and how they improve outcomes for consumers and the economy,” explains Keaney.

“So it’s integrated across the organisations, and it’s really helpful for people, whether they’re thinking through, for example, what the latest cyber-threats are and how regulators can prepare for them, or whether it’s thinking about good ways to tackle the gender pay gap in HR or the best approach to the cost of capital.”

Additionally, it has a number of ongoing projects that have relevance to all members. “We have focused on two key pillars. The first pillar is infrastructure and investment, and the second is improving outcomes for consumers in vulnerable circumstances.

“In the first pillar, we’ve been working with our cost of capital group, thinking about how we as regulators approach the cost of capital process and how you can bring all the different voices into the price control process and balance the needs of current consumers and future consumers, in the context of making sure that we have the investment to deliver the future infrastructure we need,” she says. It’s a particularly pressing task in energy where Ofgem increasingly has to weigh up tackling climate change against the size of energy bills.

This collaborative learning feeds into the way regulators have been approaching their current price control decisions and UKRN has published a report explaining how these decisions have been reached and how and why they differ across different industries.

The other area is improving outcomes for consumers in vulnerable circumstances. “We’re supporting some ongoing work that Ofwat and Ofgem have been doing with water and energy companies to share priority service register data. That’s continuing, and one of the things we’re doing at UKRN is thinking about whether there are potential things we can learn from that in other sectors.”

Keaney says work on vulnerable consumers and infrastructure investment will continue to be key for 2020. As for other plans, she says: “We’re in the process of working up our work plan and budget for 2020/21, so that’s in development. And we’ll be taking account of the NIC recommendations as part of that process.”