Utility Week

The Month in Review Brearley Pinchbeck 6 | NOVEMBER 2022 | UTILITY WEEK "Acting with speed is not the same thing as acting in haste, and – as we are learning daily – investor trust is a much- undervalued commodity in the economy." Emma Pinchbeck, Energy UK CEO, on the Energy Prices Bill (see below) The Month in Review F ormer Ofwat chair Jonson Cox has said the water sector has lost public legitimacy and warned company execu- tives to "publicly face into their performance shortfalls" in a letter to the head of the House of Lords committee conducting a probe into Ofwat's work. Cox recom- mended that the "exceptional returns" earned from asset bases be shared with customers to redress the "crisis of performance and public con• - dence". The former chair, who appeared before the Industry and Regulators Committee in September, wrote to Lord Hollick describ- ing the current situation for the sector as "severe", causing the loss of public legiti- macy. "It may be tempting to lay blame at the door of regulators," Cox wrote. "But these are FTSE100/250 scale companies and need to take responsibility as the regulatory regime requires them to do." He called on chief executives and share- holders to "publicly face into their perfor- mance shortfalls and not hide behind their trade association, Water UK, or regulators". Cox previously highlighted the bene• ts that highly geared companies could feel due to "unprecedented" in' ation. He warned Cox: water sector has 'lost public legitimacy' Early end to price freeze leaves 'huge uncertainty' Industry commentators wel- comed the prospect of more targeted support for energy bills following the announce- ment that the government's Energy Price Guarantee will remain in place for just six months, rather than two years as originally planned. Just days a• er his appoint- ment as chancellor, Jeremy Hunt announced that the ' agship scheme – which caps gas and electricity prices to limit the bill for a typical household to £2,500 a year – would be scaled back. Hunt said ending the sup- port in April would allow the government to develop a new scheme that cost "sig- ni• cantly less than planned while ensuring enough sup- port for those in need". National Energy Action chief executive Adam Scorer described the move as "an almighty trade-oš ". "In seeking the con• dence of markets, the government has created huge uncertainty for households," he stated. "Everyone knows why deci- sions have been made at breakneck speed, but ques- tions need to be answered, and answered quickly. "Who will still get sup- port? Will it include vul- nerable households not on welfare bene• ts? Will that support be deeper for those in greatest need?" He continued: "Many vul- nerable people were holding on by their • ngertips. Gov- ernment has to be very, very careful it doesn't prise them away." customers will see the indexing of asset bases as a windfall so suggested it was rea- sonable to ask companies to share "excep- tional returns". He said: "The loss of public con• dence in the sector will itself be a drag on company valuations, and rapid resolution of the environmental problems will itself improve investor con• dence and valuations." Company boards should consider sys- temic breaches of environmental perfor- mance in the same vein as major safety failings when considering executive pay and remuneration, Cox said. He encouraged tighter alignment between performance and pay as a way to restore customer faith. Storm over' ows have been a focal point of the committee's inquiry – re' ecting pub- lic and political interest in river health. On these, Cox said the sector has "lost all public con• dence" and called upon all organisa- tions to ensure over' ows are used only in storm conditions. He called for a "fast and thorough" review of permits by the Environ- ment Agency (EA). "All parties need to recognise that the problem is not just 'investment', as is so o• en cited by companies," Cox wrote, citing EA statistics that sewer maintenance caused around one-third of over' ow breaches. "Operating performance is for companies to manage. They certify to Ofwat every year that they have the resources to operate and maintain their services to meet their legal obligations and failure to do that should be at their cost. If they don't believe they have the resources to do their job, they should have appealed." Remedying problems, including any breaches brought to light in the EA and Ofwat investigation into wastewater treat- ment works, Cox said should be funded by companies and their shareholders. Meeting new standards of performance however could be factored into customer bills. Ruth Williams, water correspondent Keynote speaker Jonson Cox will deliver the closing keynote speech at the Utility Week Forum on 8-9 November. To see the full agenda and to • nd out more about attending go to https://bit.ly/3yV8UGv F ormer Ofwat chair Jonson Cox has said the water sector has lost public legitimacy and warned company execu- tives to "publicly face into their performance shortfalls" in a letter to the head of the House of Lords committee conducting a probe into Ofwat's work. Cox recom- Jonson Cox, former chair of Ofwat

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