Utility Week

UTILITY WEEK | 22ND - 28TH FEBRUARY 2019 | 9 An insider's view S peaking privately to Utility Week, one source who has worked across several areas of the industry and is still closely involved with utilities, thinks that if rena- tionalisation were to happen then a water CEO's role and ensuing salary would still be an attractive proposition for many high-per- forming candidates. "I still think other strong performers of similar ilk would be attracted in." What would be the main pull for those executives, then? "Even those renationalised salary pro- jections aren't bad. Utility companies do, and would continue to, attract good people, generally. Although they are, and probably always will be, beaten up by the media and politicians." It may be a cliché but it's not all about the money either. Those with a strong pub- lic service ethic will care about doing a role that addresses the challenges facing water, energy and our climate. And there are other draws. "A really big attraction of the job if you're running a water company, or a network, with a monopoly status like that is that you're guaranteed a good steady income for the business. "Other chief executive roles – even else- where within the sector, such as in parts of energy – can be financially nightmarish in comparison. "It's a constant battle for CEOs who are absolutely at the mercy of the markets, which can affect cashflow and debt-funding. "If you've got guaranteed income as the big utilities have, and while it may be less secure now, it's still more secure compared to the outside world. "You at least know you are definitely going to get millions of pounds coming in. There are easier decisions to make in some ways." Equally, though, getting the right people into such roles is key and like everything, you get what you pay for, he says. "These are really big roles. And if, for example, you want a 'turnaround specialist', someone to solve major utilities problems, then people of those skills and calibre just don't come cheap. "You also have to give them long-term, performance-related incentives. "What these executives can deliver in overall terms of the business is the impor- tant thing to focus on – not their pay or bonuses. "In that sense, Labour's idea on all this is a very blunt instrument." But he also feels there is no room for complacency. "There's a clear and pre- sent danger of renationalisation becoming a reality. And this may be a Labour policy now, but so was the price cap. Although I don't think they would on this issue, it isn't unknown for the Conservatives to pinch a Labour policy because it's a crowd-pleaser." Taking the flak But does he think the negative public per- ception of utility chief executives and their pay levels is even fair? "Well, I don't think public perception of them is all necessarily negative. It largely comes down to the results these individuals are delivering for their customers. "I think this pay controversy should also be looked at in context. This is not just about utilities. It is a sign of the times… You have many people in our society who haven't had a bonus, or a wage rise, in a very, very long time. People who are really struggling. "The chief executives may actually be doing a good job, but there will be people – a growing number – who will want to see them cut down to size.' "This pay controversy should also be looked at in context. This is not just about utilities. It is a sign of the times." No escape for energy chiefs Energy retail chief executives have not dodged the "fat cat" label – far from it. Cartoons of overweight, cigar-smoking felines waiting to "pounce" on unsuspecting electricity and gas consumers is an image that has stuck, particularly to those running the big six Things came to a head in February last year when MPs branded as "feeble" the energy sector's response to the threat of a price cap (now in force), which they said the industry had only "brought upon itself". Publishing its report on the government's dra€ bill to cap standard variable tariffs, the energy select committee said suppliers "did not take repeated warnings from the government seriously enough". It also accused Ofgem of being "too slow and reluctant to use its extensive powers to step in and protect customers". In Utility Week at the time, committee chair Rachel Reeves wrote: "Customer loyalty should be rewarded by energy suppli- ers, not exploited." This reaction looks likely to continue with the price cap already set to rise in April. Just weeks a€er arguing against the price cap, in June 2017 SSE's chief executive, Alistair Phillips-Davies, found himself under fire for being awarded a he€y rise in his remuneration package, to £2.92 million. Defending the increase, the company said at the time: "We recognise executives are paid substantial sums in line with their responsibilities, but at SSE executive remuneration is strongly linked to perfor- mance and length of service and the company has been and always will be disciplined in its approach to pay. We would encourage people to read the remuneration report in full."

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