Utility Week

8 | 27TH MARCH - 2ND APRIL 2020 | UTILITY WEEK Interview With Cadent lagging behind the other gas distribution networks as United Utilities once trailed its peers, Fraser said the chance to deliver another turnaround excited him: "If the company was number one in eve- rything, I don't think it would be as appealing for me. "The company itself is going through a huge oppor- tunity with the new brand, a huge opportunity with the new regulatory settlement coming up, to really reset the bar in terms of operational performance and the way we are seen by our customers." He also believes he is the right fit for Cadent: "I think companies, at a certain time in the cycle, need a market- eer or a politician, and at other times in their lifecycle they need an operator to run them. And Cadent at the moment very much needs an operator." Fraser says the overall aims of a gas company are broadly very similar to those of a water company: "To look at it from a sector level, it's about doing a good job, keeping customers' bills as low as you can, helping vul- nerable customers and taking our responsibility to the environment seriously, which is what we're trying to do by driving hydrogen forward." But he says the way they are incentivised to achieve them are quite different: "Water is very much about an end-of-the-pipe type of regulation… It's about the quality of the product, either at the tap or at the end of a pipe going into a river. "What I've found quite interesting in gas is that it's very much an all-encompassing form of regulation that's looking at a number of detailed operational parameters. "Ofwat, for many of the right reasons, has moved away from that to an extent. Operational performance was still important, but it wasn't governed by 70 or 80 different operational parameters. "I, as an operator, actually enjoy that," says Fraser. He likes having targets to aim for: "You know what you've got to do and you either do it or you don't." Possibly as a result of this approach to regulation, Fraser says the gap between best and worst-performing companies is "much tighter" in the gas sector than in the water sector: "Nobody's good at everything in gas. Whereas in water it tends to be that the good companies are generally good at a lot of things. "At the end of the day there's an inherent safety issue, isn't there? So we have to work in a very much more uni- form way in the sector. We've all got one hour to respond to a leak – that kind of thing." The front may be closer, but Cadent is still at the rear. In 2017/18, the company was the only gas distribution network that failed to deliver its annual outputs, miss- ing three targets for customer satisfaction and reliability across two of its license areas. Fraser is blunt about Cadent's past performance: "The problem with this company is that there's been too many times in the past where they've either not done the things they've said they should or met the targets they've been set and agreed with the regulator. "That's why we are at the bottom of the pile. We won't be there for too long." He says they are "throwing the kitchen sink" at the problem: "On Christmas Day, we had 71 teams working in London alone just to make sure we hit our targets… "At the end of the day, there's no point in hiding from the fact that we have operational challenges. We need to overcome those." He continues: "That said, there are also some things we're good at and one of the advantages we've got is that, if you look at our four networks, we're very good at some things in every net- work. But we don't put it together in one place and that's the challenge the network directors have to face." According to Fraser, one of the reasons they find themselves in this position is that when the company split from National Grid the IT systems were a "sham- bles". Even now he says they are still in the "Dark Ages". He should know exactly where his workers are and what they are doing. Right now, he admits, "we don't". "If you've got a slick system that allows you to live auto-schedule a team based on their current geography, that's a lot better than a team that comes to the office in the morning and is given the work for the day. To get to that place can be painful and it can take a long time." He says the IT department is working hard to bring them up to speed but it will be a slow process and "frankly they are only now being supported with the right investment". They are not trying to create an "all-encompassing" IT system that can do all things at once. So long as there is a good system for storing and sharing data, then individual apps can be used to complete a number of specific tasks. They will be in a "much better place" in 18 months. In its recent report, the RIIO2 Challenge Group noted that Cadent's costs are some of the highest among the gas distribution networks. Fraser does not dispute this: "The way we buy some of our products, which adds to the cost base, is ridiculous for company like this." One issue, he complains, is that: "There's been too much focus in this company in the point cost of some- thing – so the cost at the point of delivery – and there's been not enough focus on the costs of the company overall." He cites the company's call centres as an example: "It always intrigues me why companies pay people in call centres the least in the business, because actually they're some of the most important people. "If you phone up for a connection, it touches eight people prior to a shovel going into the ground to do the work," Fraser explains. "We are a simple company. We're not putting satellites in space. So why do eight people talk to you? "Why don't we put a few more people in the call cen- tre and they manage seven or eight customers at the same time, and they manage it from cradle to grave? The customer gets confidence from dealing with only one person. We don't lose the paperwork or the quote or whatever." Call centre staff must have "deep, intelligent" rela- tionships with customers, who should feel that they are dealing with a much smaller business. "I don't think any company's truly nailed it," he adds. Fraser says they are now "nipping away" at their cost base and should be in the middle of the pack by the end of the current regulatory period: "Now, we don't want to be in the pack. We want to be number one because we've got economies of scale. "But Rome wasn't built in a day." This interview was conducted before the coronavirus outbreak in the UK. The second part will be published shortly and will cover hydrogen networks and regulatory returns. "It always intrigues me why companies pay people in call centres the least in the business, because actually they're some of the most important people."

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