Utility Week

12 | OCTOBER 2021 | UTILITY WEEK Interview WPD's mechanism sets out a series of volume drivers, each with their own output measure. The uncertainty mechanism would be triggered annually based on the unit costs and volumes delivered. He says: "I really hope this can be something that works not just for WPD but for the wider industry. We all have a common challenge – we don't want cus- tomers to pay for things that aren't going to happen. But equally, if we are going to be agile and react to circum- stances during the price control, the process has to be there to allow us to be fleet of foot. We can't be going back to Ofgem and presenting huge papers while people are asking – 'when are you going to connect me?'." Swi‡ believes an increasingly flexible energy system will allow DNOs to plan much more accurately. "Say you're looking at something like a primary substation and putting in larger transformers. You prob- ably need to allow a two-year lead time for that because of all the other moving parts. With the developments in flexibility and the way we can track the rate of growth, that maybe allows us to leave that decision another year. It allows us to demonstrate much more clearly when and why something is needed." Or, indeed, if reinforcing the network is necessary at all. Which brings us to one of the key debates for ED2 – the DSO, and how this role aligns with that of the DNO. Swi‡ asserts that "without a doubt we have led the industry on DSO and flexibility" and believes ED2 will be an important development phase for the model. How- ever, he is unambiguous in his view that, while there is already distinct functional model for the DSO within WPD, the model is not yet ready for full separation. He explains: "Independent governance is something we're totally on board with. We're willing to have some form of independent review on an ongoing basis. The more we can show that the decisions being made are the right ones, the less suspicious people will be and the more trust they have that we're doing the right thing. "But, in terms of full separation, right now would be the wrong time because of the huge challenges we've got ahead of us in terms of decarbonisation. We believe we are demonstrating independence while avoiding incur- ring the costs of duplicating large parts of our capability, including IT costs in particular. To introduce a whole new ra‡ of interoperability now would not serve our customers well. We've got to demonstrate that we can deliver what stakeholders want. Let's get on and do that and then we can talk about structures." Swi‡ continually returns to the theme that he can talk with confidence about what his customers want because they have told him directly. "Stakeholder engagement" is a term littered throughout the DNO business plans but Swi‡ insists it cannot be an empty phrase. He points to 19,000 direct stakeholder engagements and clarifies "these are proper interactions, not just a card through the letterbox and a tick in the box". In all there were 3,000 formal responses to the business plans. He says: "The key steer from the regulator was that this plan needed to be co-created. So, we literally started with a blank sheet of paper. "When we put the plan out in January that was the first time we had crystallised all those stakeholder inputs in one place. Rather than assume we had got that right, we decided to pull together what we had and check with people. Have we understood you? Is this what you want?" The move put WPD in the spotlight – and to some extent the firing line. Duncan McCombie, the outspoken chair of the networks' customer engagement group (CEG) called for WPD to be "more radical or ambitious", saying most of its commitments only represented "incre- mental change from those currently being delivered in ED1." Swi‡ claims he welcomed the robust feedback and points to a decisive response, including ramping up the ambition on decarbonisation by committing to become net zero by 2028 – 15 years earlier than indicated in the first iteration of the business plan. "In some areas the output expected was clear but the timescale wasn't. That was what happened with net zero. There was a definite change in the country's ambi- tions on net zero during that time. We were consulting with councils who were saying to us – we're looking at 2030, why aren't you? "We were first of all given this bandwidth of between about 2030 and 2050 and then when we pushed people further it became clear they supported us having a much more ambitious drive. "What is really important for me is that we were able to quantify the financial impact. You can't separate the financial implications otherwise it's a meaningless con- versation. Of course people want you to be as ambitious as possible if they're not aware of any consequences." Swi‡ says that ambition is something WPD shares with its new owner and expects the complementary skills the tie-up brings can help them achieve more together. He says: "PPL were an excellent owner and one of the key components of that was the trust they had in the UK operation but also the long-term nature of their invest- ment. National Grid absolutely shares that." We meet just a few weeks a‡er the Competition and Markets Authority cleared the transaction so it is understandably that Swi‡ becomes decidedly more tight-lipped at this point in the conversation. He declines to wade into the debate about the premium paid by National Grid and whether that undermines arguments about the cost of capital in energy, saying simply: "We are focused on how financeable WPD is and we will be taking due stock of the CMA's current and final position [on the appeals by gas and transmission networks]." National Grid has previously told Utility Week it would adopt a "light-touch" approach to seeking syner- gies with WPD and Swi‡ agrees with this. "Like our previous owner we will be a business unit within the group. We are very closely aligned in our vision for the future and driving the transition towards net zero and a smart energy. But it is too early to be specific on potential synergies because Grid's UK experi- ence is transmission and ours is distribution so while complementary, the core roles and functions we under- take differ in order to meet the needs of our customers." He insists that the new owner is keen for the takeover not to distract Swi‡ and his team from the important work in front of them, in terms of overcoming the chal- lenges presented by Covid and submitting a final busi- ness plan to Ofgem in December. "The attraction of us to them is that we are at the heart of the energy transition. There's a huge amount to achieve over ED2 and we're itching to get on with it." James Wallin, editor "Of course people want you to be as ambitious as possible if they're not aware of any consequences" continued from previous page

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