Utility Week

UTILITY WEEK | 8TH - 14TH NOVEMBER 2019 | 19 Policy & Regulation Election puts spotlight back on renationalisation The announcement of a general election in December puts the spotlight back on Labour's plans for renationalisation. Utilities must be ready to fi ght their corner. Comment Jane Gray H earts are in mouths across the utilities sec- tor as the nation steels itself for yet another bout of hubristic political campaigning in the lead up to December's general election. In the weeks to come the inevitable sound bites and facile one-upmanship that come with election- eering will seem all the more juvenile to industry leaders with a great deal at stake. For whatever polling positions may suggest today, this is an election with an uncertain outcome and the potential for radical impacts on utility com- panies of all stripes. As Utility Week goes to press, the Brexit Party has just recorded a four-point jump in the latest Yougov poll, which will send a shiver down the spine of every prospective Conservative parliamentary candidate. Clearly the two top campaign issues as far as utilities are concerned are renationalisation and decarbonisation. And while the detail of policy around the latter may end up being most relevant, it's the former that will induce nail biting. Labour's promise to take utilities – including water, energy networks and generators – back into public hands has met with scorn across the sector, with trade bodies and some bolder individual companies unpicking the party's plans and high- lighting ‚ aws. They point to the value that private investment has delivered for consumers and society since privatisation in the 1990s. Rhetoric around renationalising the "big six", for instance, has prompted many industry commentators to say Labour is demonstrably out of touch with sector developments – or else is wilfully ignoring the recent dis- solution of this industry oligarchy. Would Labour really intend to force Ovo Energy into public ownership? Another big problem is that the process of renationalising companies would be a sinkhole for management time and resources and would therefore be a distraction from the higher purpose of utilities to serve consumers, derailing strategies to put this value back at the heart of industry operations. More broadly, however, it is Labour's low valua- tion of utility assets which provokes most fear and fury across boards and executive teams when rena- tionalisation is discussed. The shadow chancellor, John McDonnell, has suggested a Treasury under his direction could fork out just £14.8–billion for the water industry compared to the £73 billion estimate of the asset base value made by Ofwat. And with the prospect of a Labour government now poten- tially just weeks away, it is this risk that companies will be most concerned to mitigate. Many utilities have been actively planning for some time now how they might protect shareholder interests in the relatively unlikely event of a Corbyn government coming to power. Speaking to those in the know, Utility Week heard that a number of companies have commis- sioned independent valuations of their asset bases and sought out legal advice on the best potential routes for contesting sub-value appropriation of assets. Those that haven't undertaken such work might want to make a start – and quickly. As well as preparing for renationalisation, utili- ties might be well advised to consider the rami› ca- tions of a Conservative win for the utilities industry landscape. For while Boris is no Bolshevik, it shouldn't be assumed that a Tory government would necessarily mean continuation of the status quo in all areas. Once a Brexit deal is sealed and on course to be delivered, one-nation Conservatives will be on the lookout for domestic issues that can demonstrate their will to champion consumer interests and which can combat populist Labour pledges like renationalisation. Where better to start than the utilities sector, perhaps via a major shake-up of the regulatory apparatus? One way or another, there's little doubt that for utilities, everything is in play. Jane Gray, content director, Utility Week

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