Utility Week

UTILITY WEEK | JANUARY 2023 | 11 Customers in which they can be highly valued enablers of a ordable, comfortable, environmental sustainable and all-round smart living. They hope to do this by nancing the installation of low-carbon technologies and leveraging usage data to help consumers play in a ex- ible, zero-carbon grid, for example. In the same future, according to senior industry gures who have spoken to Util- ity Week about their strategies, they would expect to enjoy the desirable side-e ects of greater cash ow stability, diversi ed revenue streams and reduced business costs associ- ated with grizzly issues like customer churn. It would be everything today's market is not. This vision is no mirage. Globally, "energy as a service" for industrial and commercial end users has an estimated market value of around $70.5 billion (£57 billion), according to various market research organisations. By the end of the decade, that value is expected to at least double with gures in the region of $148 billion being widely quoted. With the model now proven for I&C consum- ers, the domestic market stands ripe for transformation. Similar though less talked-about oppor- tunities exist in the water sector. There, com- panies are struggling with the challenges of growing population, increasingly scarce water supplies, spiralling treatment costs and over-stretched capacity in the sewerage network. The problems posed by all these challenges could be signi cantly soothed if service innovation were able to ow, sup- ported by more accurate usage data and the installation of kit for "water neutral" homes. Wobbly legitimacy But UK consumers have clearly not received the memo that service innovation from utili- ties is their key to a brighter tomorrow. Why? A key issue, according to expert commenta- tors, is the industry's continued failure to secure legitimacy in the eyes of its custom- ers. This is a problem that is growing with every day that the cost of living crisis deep- ens and consumer sensitivity to the cost of their most basic daily necessities increases. Utility Week's consumer research shows that just one-third of consumers believe utili- ties have legitimate ownership structures, with the rest saying it is unacceptable for energy or water companies to be owned or invested in by private investors and pensions funds. Furthermore, consumers mistrust the institutions that govern utilities. The survey showed that, of those respondents who are aware of Ofgem and Ofwat, 64% and 69% respectively felt these regulators are not doing enough to protect consumer interests. Given such widespread dissatisfaction with the status quo, it is therefore no sur- prise to see the door leœ wide open for the idea of renationalising utilities. Just 12% of respondents were opposed to this idea. This is symptomatic of an environment in which "the post-privatisation model" for utilities is looking "wobblier" than it has at any point in its history, according to John Penrose MP, a speaker at the recent Utility Week Forum in London. Penrose, who in 2021 led an in uen- tial review into the e ectiveness of utilities regulation, blames this shakiness on relent- less "sounding o " in Whitehall about the performance of utilities and a rising politi- cal inclination to reassert "state control" over utilities via "ever increasing levels of regulation". Providing closing remarks at the same conference, former Ofwat chair Jonson Cox, who also sits on the board of energy sup- plier Ovo Energy as a non-executive director, spoke at length about the legitimacy chal- lenge facing utilities. Making it plain he was speaking in a per- sonal capacity, Cox aired his view that public calls for market intervention or nationalisa- tion were an expression of "anger and frus- tration" with utilities for repeated failures in areas where, he intimated, the public rightly expected them to be stronger. Among these, he pointed not only to high-pro le opera- tional issues, such as leakage and pollution in the case of water, but also to perceived failures of transparency, skill and resolve in leadership. While there is no doubt, he said, that utilities attempting to navigate the vying pressures of long-term sustainability, reli- ability and a ordability have a tough job. He candidly observed that "decision-makers are paid to resolve these trade-o s". continued overleaf Key research fi ndings: Utility Week's research canvassed the views of over 1,000 UK adults and was conducted in October 2022. Here are some of our key • ndings. Fewer than 1 in 10 want to see their energy company deliver new services (7%). Mean- while, 12.5% want water companies to provide services, for example supporting water reuse and recycling. Price stability is the most important thing utilities can deliver for consumers (voted most important factor by 77% for energy and 58% for water). Around one-• ‰ h of consumers feel sustainability and advancing towards net zero should be priorities for utilities busi- nesses today. 72% say they would be willing to reduce consumption of energy and water to help manage their bills, while 67% said they would consider changing their usage habits in response to price signals. Less than one-third (27%) acknowledge that it is hard for utilities to deliver on sustainability and net-zero goals while keeping prices stable. 42% believe energy and water utilities should be renationalised (just 12% are opposed to renationalisation). Around one-third of consumers say it is unacceptable for private investors or pen- sion funds to own or invest in utilities. Of those that are aware of Ofgem and Ofwat, two-thirds believe they are not doing enough to support consumers. Leaping o from these ndings, Utility Week and Charles River Associates plan to publish a major report in early 2023 looking at the challenge of rebuilding utilities markets for a net-zero future enabled by enduring, value- add relationships between consumers and their energy and water providers.

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