22
| 21ST - 27TH JUNE 2019 | UTILITY WEEK
Operations & Assets
Roundtable
Utility Week Live, Birmingham, 22 May 2019
A
few years ago, totex was the biggest buzzword
in utilities. Totex – or total expenditure – was
the new approach to regulation and accounting
intended to end the traditional, perceived bias towards
"pouring concrete" or "putting copper in the ground" –
in other words, investing large amounts of money (capi-
tal expenditure) in physical assets.
Under the old regulatory frameworks, utilities were
effectively rewarded for doing this, because expenditure
on maintenance or on non-physical solutions (opera-
tional expenditure) was treated less favourably – so the
more companies built, the higher they were valued, and
ultimately the more money they made.
Totex, enshrined in AMP6 and RIIO1 (the current
regulatory regimes for water companies and energy net-
works) was meant to end all that. Did it work? That was
the question Utility Week asked industry leaders at a
special roundtable bringing together pan-industry lead-
ers, convened at the Utility Week Live exhibition and
conference in Birmingham in May, and held in partner-
ship with Costain and sister titles Network and Water and
Wastewater Treatment.
There are some of the questions we asked, and the
answers we heard:
How far has totex been adopted?
It's a mixed picture. Delegates agreed that utilities had
adopted totex thinking, to an extent. This has been
driven by the regulatory shi' to focus on outcomes, giv-
ing utilities the freedom to deliver those outcomes in new
and different ways – for example, via catchment man-
agement, whereby water companies address water qual-
Has totex done its job?
No-one talks about totex anymore, but is that because it's been
abandoned or been adopted into business as usual? A roundtable
of utility executives explained all. Ellen Bennett was there.
