Utility Week

UTILITY WEEK | 19TH - 25TH OCTOBER 2018 | 19 Operations & Assets "We as an industry have failed to take control of the narrative and take control of innovation in our sector. "It is my hope that ten years from now we do not talk about being digital because that is just how we do business." Darren Bentham, executive partner, IBM All the news from the floor Katie Pigden and Adam John summarise some of the key arguments presented at Congress. The price cap Following on from last year's Congress, Michael Lewis, Eon UK's chief executive, didn't shy away from expressing some strong views about the energy price cap. Ofgem has released a series of working papers considering the various options it could take to implement the measure. Most recently, the regulator revealed proposals to set the cap at £1,136 a year for a typical dual fuel customer paying by direct debit. Some energy companies described the level of the cap as a cause for concern, while others said they would be scrutinising the methodology and input data. Lewis has made no secret of the fact Eon has been opposed to a price cap "from the beginning", but he said parliament had spo- ken so it was now "critical" we get it right. Perhaps talking directly to the regulators in the room, he made key suggestions about how to avoid the risk of "confusing custom- ers and harming low-carbon investment". He expressed concern that market inter- vention "brings the danger" of reducing cus- tomer engagement and could "ultimately be counterproductive" to driving forward the new energy agenda for customers. "There are some important things that Ofgem needs to do in its consultations to make sure the price cap is workable, and that it doesn't have the negative effects we have talked about," he said. The three important factors he cited were wholesale costs, operational costs, and headroom. Lewis raised concerns that the revised February to July observation period, which is used to set the price cap, misses the wholesale price increases of August and September. This, he said, may result in consumer prices increasing over a very short period. "That is going to have a very negative impact on the customer experience," he said. "It is really important we don't get a short-term reduction which is reversed very quickly, creating a negative impression." Speaking in a later session, Dermot Nolan, chief executive of Ofgem, responded to the possibility of price increases over a short period by saying the regulator would be "as transparent" as it possibly could, add- ing that customers would know somebody was "watching their back". In a panel discussion with fellow regula- tors about what successful regulation looks like, Nolan discussed how the narrative of regulation has changed over the years and how it is no longer deemed "acceptable" for people to pay significantly different prices for the same goods. He said: "In my view it's one of the reasons that has led to the price cap and why Citizens Advice made a super-complaint to the CMA about the whole issue of loyalty. "At some level as an industry, and perhaps as the regulatory body, we did not tap in to the recent announcement by the National Infrastructure Commission (NIC) about its root and branch review of regulation, including the potential of a super-regulator. Certainly, those regulators present seemed to accept the case for work- ing together more closely. But perhaps most interesting was the debate around what suc- cessful regulation could look like – which revealed a new focus on fairness, as opposed to trust, and a sense that pure play economic regulation is giving way to a wider role, "upholding the social contract", as one reg- ulator put it. This is a far cry from the regu- lation envisaged at the time of privatisation, and a clear response to changing politics. Day two built on those key insights and framed them against the need to also drive resilience, investment and innovation. Among many salient messages, delegates heard how digital transformation and arti- ficial intelligence (AI) will be vital business enablers going forward; how meeting the UK's infrastructure needs will be impera- tive for protecting the country's interests and future investments in energy and water – particularly with the rising challenge of climate change; how customer-led efficiency must be the sector's new mindset; why elec- tricity is not the only game in town for heat and transport; and how mutual working and learning lessons from each other could help ensure the agile approach and competitive advantage utilities increasingly need. Leaders and delegates le the Birming- ham Conference and Events Centre enthused – and with much to think about. Suzanne Heneghan continued overleaf "I think we do have one additional challenge in Northern Ireland and that is the absence of a government for almost two years. That has put more of a spotlight on to the Utility Regulator because stakeholders have been looking increasingly to the regulator to try and shape and influence the longer-term energy agenda." Jenny Pyper, chief executive, Utility Regulator

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