Utility Week

UTILITY WEEK | 18TH - 24TH OCTOBER 2019 | 9 Utility of the future: Regulation What we can learn from Northern Ireland Debate about the future of utilities in the UK is overwhelmingly dominated by the interests and structures of the mainland GB market. But what of Northern Ireland? As the Utility of the Future campaign turns the spotlight on drivers for regula- tory transformation, we examine three ways in which Northern Ireland has diverged from the GB market and the les- sons on o• er. Pan-utility regulation. The • rst is in terms of pan-utility regulation. There has been considerable speculation from some quarters of late about the potential advantages of doing away with Ofgem and Ofwat as separate economic regula- tors and creating instead a single utility super-regulator spanning the energy and water sectors. NI already has this model in place. Its Utility Regulator is respon- sible for water, energy retail and energy network regulation. Also speaking at Utility Week's recent Congress event, chief executive Jenny Pyper extolled the virtues of the model, claiming it supports joined-up thinking about interdependencies between utility systems – a valuable bene• t in light of growing resilience challenges – as well as encouraging the uptake of best practice across utilities in disciplines like cost reporting and asset management. She also said that consolidated regulatory responsibility brought internal resource eˆ ciencies to her organisation, allow- ing it to develop multi-skilled teams that can be ‰ exed to work key projects as the regulatory cycles for each vertical come and go. This said, Pyper was not on the cam- paign trail for a utility super-regulator in GB. She observed that, alongside the eˆ ciencies that a single regulator can grasp, the model also brings challenges in terms of retaining important specialist skills and knowledge for individual utility types. She also admitted that she would predict major diˆ culties for a pan-utility regulator presiding over the considerably larger scale and more complex GB utilities market. Pricing. The second di• erence is price regulation. The supply market in NI is not subject to the standard variable tari• price cap currently creating havoc for GB energy retailers – an intervention Pyper frankly stated she saw few advantages for. The Utility Regulator, however, is responsible for price regulating part of the NI energy retail market. It sets the tari• s and margin for the dominant supplier – Power NI – on an annual basis. Mean- while, a relatively small pool of competi- tive retailers • ght for the opportunity to attract customers away from the incum- bent with better price o• ers and service innovations. Pyper claims the set-up is an e• ective way to o• er consumers choice between an established – and relatively well trusted – brand with regulated prices, and the opportunity to • nd savings in the more dynamic competitive supplier arena. Interestingly, at Utility Week's Con- sumer Vulnerability conference in June, Centrica's former director of consumer vulnerability Steve Crabb suggested that creating a price-regulated supplier with a primary duty for protecting the interests of vulnerable consumers could be a good solution to key GB market challenges around choice and fairness. Smart meters. The third area of divergence is over smart metering. While Ofgem continues to grapple with its responsibility to oversee the GB smart meter rollout, Pyper candidly told the audience at Utility Week's Congress that the Utility Regulator and NI at large had "dodged a bullet" when the devolved government declined to participate in the programme. While acknowledging the need for greater visibility of consumer demand patterns and activity on the low-voltage power network, Pyper insisted that NI has an opportunity to leapfrog the many technology speci• cation and redun- dancy issues – not to mention consumer engagement challenges – that have been the experience in GB by using alternative solutions. She expressed real hope for a trial of Bluetooth technology, which she said has great promise to give the same smart capabilities and foundations for decarbonisation that conventional smart metering can o• er – at a fraction of the cost and consumer disruption. Jane Gray, content director "Whether we will be e• ective in stimulating public debate I don't know, but we are going to try, and we're also going to try and push the sector we regulate to increase consciousness too." Nolan said that Ofgem may also need to be "interventionist" if it is to stimulate mass pub- lic behavioural change around decarbonisation. He said this was particularly true when it came to electric vehicles and how to manage the demands on the networks result- ing from charging. "Things we are thinking about at the moment include whether to put in some sort of mandate where the default charging rate at peak times is frankly very high. Now, that might evolve very naturally through market conditions and incentives but it might not. We might have to make an active intervention into people's lives. They in turn may not like that. There may be out- rage. So, we have to justify that level of intervention." Regrets – he has a few Re‰ ecting on his six years at the helm, Nolan said his main regret was that he had not reacted more quickly to the CMA super-com- plaint and made moves to temper public concern around pricing. However, he said he was comfortable with the position the market now • nds itself in, admitting the price cap would cause some pain but that this was helping to drive a necessary transition. "I look back over my time and think there are many things I regret about the retail market and things I or we should have done di• erently or at di• er- ent times, but I don't regret the current situation. The level of change and innovation that is taking place is quite spectacu- lar and when I joined Ofgem in 2014 the phrase 'the big six' was enshrined as a constant. Now, there isn't a big six – or at least not in the same way – and verti- cal integration is no longer really an issue. And by and large that is™positive."

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