Utility Week

12 | 21ST - 27TH SEPTEMBER 2018 | UTILITY WEEK Policy & Regulation Analysis T he pressure and upheaval across the utilities sector is laid bare in the sec- ond CEO Insight 2018 report, produced in association with Economic Insight, and summarised here. The full report is available on the website to Utility Week subscribers as a download. The wide-ranging survey of chief execu- tives seeks to take the temperature on the political and economic climate in which the sector operates and gauge views on the major challenges industry leaders face now and in the future. The results reveal a cohort grappling with an uncertain political and economic land- scape, frustrated by regulatory frameworks, and despairing of the poor – yet perceived as unfair – reputation engulfing the sector. Chief executives in the six industry sectors surveyed (energy retailing; energy genera- tion; gas networks; power networks; non- domestic water retailers; domestic water wholesalers and suppliers) are almost united in seeing regulatory change and uncertainty as having the most impact on their individ- ual sector. While the good news has been the buoyancy of the UK economy, which has surpassed the expectations shown in the previous CEO Insight, concern is mount- ing on the impact that Brexit could have on financial stability. Brexit worries have par- ticularly grown among chief executives of energy retailers where a downturn in the economy could have an impact on custom- ers' ability to pay their bills. Those we spoke to across utilities more widely highlighted the growing risks they faced over the cost of materials and labour. Ongoing tensions with regulations and regulators are brought out by our research, with regulators seen to be increasingly out of touch with their sectors – though as might be expected this is not uniform. Nearly two- thirds of chief executives across the utilities spectrum say their regulatory regime is not fit for purpose. The figure leaps to 100 per cent among energy retailers, energy generators and non-domestic water retailers, and to 75 per cent among domestic water wholesalers. What's troubling you? Utility Week's latest CEO Insight 2018 report, produced in association with Economic Insight, lists the key challenges identified by utility industry leaders. Denise Chevin reports. Methodology of research This year, 24 chief executives contributed to the research carried out in April for Utility Week by independent market research company Insight Advantage, up from 21 in 2017. Their input was anonymised and aggregated in line with market research guidelines and Utility Week will not be providing details of which companies responded to the survey, in order to protect the anonym- ity of chief executive responses. To add commentary to the survey responses, Utility Week also sought out qualitative comment from a range of chief executives over the summer about the find- ings, which has helped to shape and inform the analysis. DO YOU BELIEVE THAT CUSTOMER PERCEPTIONS OF UTILITIES ARE CHANGING IN ANY WAY? Overall Energy Energy Power Gas Water wholesalers Water retailer retailers generators networks networks (domestic) (non-domestic) Yes, they are improving Yes, they are becoming more negative No, they are static 100% 33% 25% 100% 63% 40% 50% 85% 50% 63% 38% 40% 20% 4% Customer perceptions worsening Over 60 per cent of chief executives (63 per cent) believe customer perceptions of utilities are worsening and 33 per cent believe they are not improving. Just 4 per cent believe cus- tomers have a better view of them than previously. The results are to be expected. Utilities and bills have come in for considerable public scrutiny in recent times. David Bird, chief executive of Co-op Energy, remarks about the findings: "It's a shame that customer perceptions aren't changing, given that overall customer satisfaction levels are increasing significantly. "There is also widespread public concern about the smart meter rollout. Somehow, we have to engage with consumers and get across the benefits that smart meters bring as well as other programmes that are important to them, like energy efficiency advice and sup- port and renewable community generation. And suppliers need to be seen to be adding value, so the discussion is not all about price." Bird says it's "frustrating" that all the major investments utility companies have made in upgrading the infrastructure are adding to the bills for customers now "but they'll only get the benefit in five or six years' time. "We've got to become better as an industry at putting over the benefits to the customer and the wider benefits to the country. The whole debate seems to be focused on price – but it has to become focused on value. We have to up the level of the debate."

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