UTILITY WEEK | NOVEMBER 2020 |
5
Knowledge worth Keeping
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Executing the will
of the people
B
y throwing out Ofwat's chosen Wacc level, the Competition and Markets
Authority has caused uproar in the water sector and looks set to exert a
heavy influence over the path for energy network settlements in RIIO2.
But beyond that, it has also given new heat to a long-bubbling argument
that entrenched regulatory approaches are no longer fit for purpose in a world
threatened by climate change. And furthermore, that regulators are failing to
acknowledge and respond to the expressed will of consumers to pay for long-
term resilience and sustainability.
Despite both Ofwat and Ofgem introducing more requirements for customer
engagement in business plan development, it was a major bugbear with water
company appellants to the CMA that customer inputs and backing seemed to
have been sidelined by Ofwat in favour of its own appraisals of water company
and customer priorities. The same grievance was cited by energy networks in
responses to their dra determinations for RIIO2.
Adding resonance to their complaints are the outcomes of the Climate
Change Assembly's report, which showed an overwhelming public willingness
to go further and faster with actions to mitigate climate change than many had
thought there was appetite for (see analysis, p18).
This all stacks up to create a picture of institutions that are out of touch with
the real views and priorities of those they are charged to represent and piles
pressure on policymakers and regulators alike to challenge residual paternalism
in the way they perform their fundamental duties.
But of course, the pendulum cannot swing too far. In research conducted
by Utility Week in May, there was certainly no clear consensus behind the idea
that the threats posed by climate change should be used as a reason to increase
consumer bills in the short term.
The survey of just over 2,000 consumers showed that 27 per cent agreed that
companies should prioritise investment to tackle climate change over and above
actions to keep customer bills low. Meanwhile, 32 per cent felt that the economic
fallout from coronavirus should tip the balance towards a focus on short-term
affordability. Unsurprisingly, those who also admitted to increasing anxiety
about their financial situation as a consequence of the pandemic were most
likely to hold the latter view.
Policymakers and regulators must always tread a difficult line in choosing
how to balance the interests of the few against the many or the present against
the future. Rarely can their environment for attempting to pull off this act have
been so precarious, or the gaping chasm of consequence beneath them so deep.
Jane Gray, content director, janegray@fav-house.com
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Letter from the Editor
Jane Gray
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