Utility Week

UTILITY WEEK | 8TH - 14TH MARCH 2019 | 7 continued overleaf The regulatory system needs to adapt to the wider changes seen in the energy system over recent years, he said. Sharon Darcy, director of Sustainabil- ity First, agreed. "It [regulation] used to be dealt with in a very calm way by calm eco- nomic regulators. This can no longer happen behind closed doors," she said. "The model we have is over 30 years old and is due an overhaul anyway: current chal- lenges make that more pressing." And there is a recognition within the industry that utilities su€ er from a legiti- macy de‚ cit, with regulated companies oƒ en featuring low down in trust indices, said Per- kins. Tony Smith, chief executive of the Con- sumer Council for Water, tells Utility Week the customers that he deals with have high levels of satisfaction with services. But they are less satis‚ ed with the industry's record on fairness. Further, digital divides will heighten the risks of varying outcomes for di€ erent sec- tions of society, Audrey Gallacher, policy director at Energy UK told the Westminster Forum event. "The future energy system shouldn't just be about the fortunate peo- ple who bene‚ t. There is still a danger that people won't engage and we need to work to overcome that and have protections in place for vulnerable customers." However, holding down the prices could dampen investors' appetite for the sector. "We need to recognise that there is a trade- o€ when developing regulatory models," Ian Thompson, senior consultant at Economic Insight told the regulation conference. His near namesake Piers Thompson, director of policy and research at the Global Infrastructure Investor Association (GIIA), warned against the risks of the kind of radi- cal overhaul of regulation that could result from the NIC review. "In the future, greater levels of invest- ment in infrastructure will be required. To ensure the regulatory model continues to be attractive, transparency and predictabil- ity will continue to have to be at the heart of it," he said, adding: "Our members are clear about what they want from a regula- tory framework. If these principles remain at its core, UK regulatory infrastructure will continue to receive the investment it needs to deliver for consumers." Thompson said that if radical change was on the cards, inves- tors and companies needed to be involved in shaping it. David Stewart, a partner at solicitors Tow- erhouse, agreed. "People in a market have to see a reward to innovate, they have to see returns to make big ticket investments. The Water belongs to the people Only public ownership can fi x a broken water sector. I n April, Ofwat will introduce new principles on transparency and governance. This is a welcome acknowledgement of the growing con- cerns that the utilities sector is putting pro‚ ts above the people it serves and employs. However, while a step in the right direction, it is more of a sticking plas- ter than a cure for a system that ben- e‚ ts billionaire investors despite burst pipes and customer dissatisfaction. In Harrow, many of my constituents are all too aware of Thames Water's record. New leadership has seen a marked change, as the company suspends payouts to shareholders in an attempt to clean up its image. However, the behaviour of the former owners provides a perfect case study of the failures of privatisation and the inability of regulators to rein in the very worst of corporate excess. In the ten years to 2016 Thames Water's shareholders paid themselves £1.6 billion in dividends, ran up a pension de‚ cit of £260 million, loaded Thames with £10 billion of debt and regularly paid zero corporationžtax. In 2017 Thames Water was ranked 23rd out of 23 water companies for customer satisfaction, according to the Consumer Council for Water. And according to its own performance report for 2017/18, it is failing to meet basic targets in 17 out of 41 key areas. Thames and its former owners are not unique – the problem isn't just with irresponsible private owners making pro‚ t at the expense of the infrastructure we all rely on. It's our privatised structure, which allows it to happen. Margaret Thatcher's decision 30 years ago to privatise our water industry has created a system that is expensive, unaccountable and unfair. No other country has completely privatised their water and sewage ser- vices. There is little competition and regulation has been deeply ¦ awed. Proponents of privatisation point to the state of the industry pre-privatisa- tion and the levels of investment from private companies over the past 30 years. While there is no denying that water quality has improved in the past 30 years, there is no form of public ownership that prevents investment – the lack of investment pre-1989 was not a consequence of public owner- ship but of political decision. Invest- ment post-privatisation has been as a result of state intervention in the "market" by Ofwat, and thanks to ris- ing standards in EU regulations. All of the investment in tackling leaks and improving water supply could have been covered using the resources garnered by customer bills, suggesting that the debt on water companies' books is at least in part delivering tax and dividend bene‚ ts for shareholders. Cleaning up Thames Water's issues, and addressing the systemic problems of low consumer trust, rising bills, poor corporate behaviour and large pro‚ ts leaving the system, takes more than new leadership and stronger regulation. As chair of the Co-operative Party, I believe that who owns an organisation dictates in whose interests it runs – so to achieve a sector that operates in the interest of the public, only a shiƒ to democratic public ownership will deliver the shiƒ in priorities needed. Democratic public ownership is necessary to make the water industry ‚ t for the envi- ronmental, investment and ‚ nancial challenges it faces. Gareth Thomas is MP Harrow West and chair of the Co-operative Party The full article is available online at: www.utilityweek.co.uk Opinion Gareth Thomas MP

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