Utility Week

UTILITY WEEK | JUNE 2023 | 17 Talking Points… "The message from the water and sewage industry today is clear: we are sorry. More should have been done to address the issue of spillages sooner and the public is right to be upset about the current quality of our rivers and beaches." Ruth Kelly, chair, Water UK "We've invested in businesses, be they gas storage or fl exible thermal generation, that have not made particularly good returns in the past. Those assets were critical in keeping the lights on over the last year. We've earned some money out of them but the important thing is those profi ts were made with a clear purpose." Alistair Phillips-Davies, chief executive, SSE "My plea to Ofgem is don't leave ED2 on the shelf and think, 'thank God we got that done' – but really roll up your sleeves and own this." Rachel Fletcher, director of economics and regulation, Octopus Energy, on the need to monitor energy network performance Quote, unquote – but really roll up your sleeves and own this." Rachel Fletcher economics and regulation, Octopus Energy, on the need to monitor energy network performance upset about the current Salary sacrifi ce hasn't led to bonus points L ast month saw a number of water company bosses publicly waive their annual bonuses, acknowledging customer concerns about the progress the sector is making. In many cases chief execu- tives were joined by other senior directors in putting forward a col- lective front of contrition. It is a clear and decisive response to recent political and public pressure over performance in a number of areas. In theory, it's the kind of move that could allow the com- panies to regain some of the narrative. But did it actually work? And what are the consequences of such a high- pro• le and co-ordinated move? On the • rst point, I suppose it depends on where you set the bar for success. None of the directors taking this step will have been expecting to be praised. Even so, the coverage in most media outlets was pretty uncompromis- ing. Most doubled down on criticisms of the sector and CCW seemed to be a lone voice in pointing out that this showed companies were listening. Certainly, it can't have harmed the reputation of the sector but in isolation I don't think much has been done to bolster it. As I said, this reaction will probably have been expected. The pay packets of water company executives look very healthy indeed to most of their customers, with or without a bonus. No-#one imagines they will have any problems paying their own utilities bills. The point is clearly that the lead- ers of Thames, Yorkshire, South West and Welsh Water all believe this is the right thing to do right now. It's hard to argue against that but I do question the long-term eˆ ectiveness of these individual‰acts. For one thing, it risks undermining moves to link incentives more closely to performance. When some chief executives are waiving their whole bonuses, will others be able to justify taking parts of theirs even if it is backed up by impressive results in some (many) areas? It's diŽ cult to see the context getting past a head- line and a picture of sewer over' ow. As we report today, unions are already calling for other CEOs to redirect their bonuses back into their companies. It also puts the responsibility on the individual rather than a board or remu- neration committee. That's not neces- sarily a bad thing but it inevitably sets a precedent and not just for the water sec- tor. Centrica's Chris O'Shea was roundly criticised for taking his bonus this year despite having turned it down in 2022. There were particular circumstances in this case, of course, but O'Shea wasn't able to use independent scrutiny of his performance as a justi• cation for taking the bonus because he had undermined this himself the previous year. The reaction in that case and now the moves by water company bosses will certainly heap pressure on other energy retailers. The energy networks may feel more sheltered from this storm but, as we saw a few years ago with the nationalisation debate, critics of utili- ties don't always distinguish between the diˆ erent actors in the sector. Maybe I'm being overly cynical and this action by senior • gures across the water sector has made an impact. Maybe it chimes with the values of many people, especially younger generations. But the real risk is that those same young people – the kind of talented, fresh thinkers we need to the next stage of the sector's evolution – look at utility CEOs and think: "Why would I ever want to put myself in a position like that?" Comment: Water sector bosses have apologised and waived their bonuses, but the criticism keeps on coming. thing is those profi ts were made with a clear purpose." Alistair Phillips-Davies chief executive, SSE

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