Utility Week

16 | 18TH - 24TH OCTOBER 2019 | UTILITY WEEK Policy & Regulation Event Utility Week Congress, 8-9 October, Birmingham A nyone unaware that utilities have a fight on their hands in the months and years ahead were le in no doubt of the scale of the challenge to come. At a convening of both energy and water leaders at Utility Week Congress in Birming- ham, there were no punches pulled, and some hard-hitting insights – including a ral- lying cry from Octopus Energy chief execu- tive Greg Jackson that energy must now adopt a war-like mentality if it is to meet the demands ahead. It's easy to see why. Aer years of talk about transition and transformation, utilities now find themselves leading the nation's emissions reduction efforts to meet the government's target of net zero by 2050. There was an acceptance among those attending that a new era was dawning, its striking features being an accent on new approaches, new business models and inno- vation, coupled with the growing power of consumers. Day two speakers and panellists drilled into the previous day's big picture visions around long-term sustainability, regulation and evolving technology by highlighting a ra of potential strategic and operational approaches industry might take towards achieving them. Building sector-wide resilience, attracting the necessary finance and investment and driving more collaboration within industry to share the load, were the key focus points. Suzanne Heneghan, Editor Resilience Delegates heard how 2019 has been a year that witnessed some of the big- gest assaults on our country's critical infrastructure in decades, brought on by extreme weather incidents and the increasingly complex architecture within which utilities operate. Richard Ploszek, head of utilities at the Infrastructure and Projects Authority, pointed to the importance of considering the risks and opportunities of "interde- pendencies" within an increasingly frag- mented resilience landscape, including the need for a greater understanding of security and provenance of data. Infrastructure "cascade issues" were also picked up by Cadent's Kate Jones, director of West Midlands Network, who shared with Congress the example of how the disintegration of part of the Whaley Bridge Dam in Derbyshire this summer also threatened one of their assets, requir- ing staff to be on standby throughout. Meanwhile, Max Wigley, head of cyber consulting at Leonardo, cautioned: "As our networks get smarter it's not going to be possible to separate the physical and virtual worlds, so we're going to have to include cyber resilience around criti- cal national infrastructure regulations. Although that brings huge opportunities." The industry's skills shortage was a major concern for Iain McGuffog direc- tor of strategy and regulation at Bristol Water, who said: "I think it's the biggest issue we face. Not just where the employ- ees of the future are going to come from, it's also about educating citizens and building an understanding about what we [utilities] do." Finance and investment With such huge capital costs and great unknowns now upon us, ensur- ing investor and consumer buy-in has never been more crucial. A panel featuring Pennon's chief financial officer Susan Davy, the chief executive of Northern Ireland's Utility Regulator Jenny Pyper, and UKPN's finance direc- tor Jenny Harrison looked at the issue of corporate financial resilience, at a time not only of huge uncertainty but one where utilities know they need to go way beyond business as usual. Davy pointed out how utili- ties' sustainability and ESG (envi- ronmental, social and governance) credentials were an "absolute growth area" of interest for investors and a factor now wholly integrated into Pennon's business plan. While just two or three years ago, investors never tended to mention ESG, now it was one of the first questions she was asked about the company. Evidence shows a focus on long- term sustainable outcomes can have an impact on shareholder returns, she said, adding: "Capital has a choice". "It's all about aligning objectives with investors," she said. "It's about what we're trying to do in the business and with our customers as well." Utility Regulator chief Jenny Pyper was a clear proponent of how a joined- up approach also brought financial assurance. "We think for utility com- panies, investors and consumers there is a certainty and predictability in knowing that, whatever the utility net- work, our basic approach to – and the regulated process around – price con- trol, is basically going to be the same. "We've had the ability of learning from three different sectors… We're spending more time at the beginning of our price control review to get our approach right, so that there are as few surprises for the regulated enter- prises as we can manage." Against a backdrop of uncertainty, including the possibility of renation- alisation, the panel noted some shi- ing of investor sentiment in recent months, with increased interest com- ing in from Europe and the rest of the world. But UKPN's Jenny Harrison said she hadn't witnessed any signs of withdrawal of equity investment, adding: "And when it comes to debt investment, I think it's all about how you manage your organisation." She said that while some regula- tory and political factors were beyond a company's control, "if a company is performing well, then I believe you will still have plenty of opportunities and interest in financing, and I truly feel that you are in a very good posi- tion to maintain that. I feel there are a lot of other companies that might struggle before we do." Battle stations Davy Pyper Harrison

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