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Policy & Regulation Analysis RIIO: the only game in town Utility Week and EC Harris undertook a major research project to find out how network companies are coping with the new regulatory regime, RIIO. Here we summarise its findings. E nergy networks are in a period of transformative change as they get to grips with the new price control regime, RIIO (or more formally, Revenue = Incentives + Innovation + Outputs). Utility Week in association with EC Harris undertook a major piece of research with industry leaders into the scale of change anticipated to arise from RIIO, the risk this entails, and how ready energy networks feel they are to respond. Will RIIO be a game changer for the industry or simply business as usual with add-ons? The key messages from the research were: • IIO will indeed be a game changer for R companies and individuals. • ll networks see RIIO as introducing sigA nificant risk with customer service as the lead item. • onfidence about current performance C under the six RIIO outputs is high. • hile all networks consider customer serW vice challenging, most respondents mark their customer service preparations as advanced. • etworks think that asset management N will be a pivotal area for innovation. • etworks expect RIIO to ask questions of N their capital programmes but show confidence that they are aligned with the new regime. • upply chain choices could jeopardS ise innovation and cost reduction opportunities. • hile RIIO presents a challenge for netW works, there is confidence that there are opportunities to "get it right". Most respondents agreed that significant changes would be needed in their organisation to succeed under RIIO. However, one in ten respondents disagreed or strongly disagreed that such changes would be necessary, while one in three neither agreed or disagreed. Commenting on the findings, UKPN's director of strategy and regulation, Ben Wilson, points out that RIIO has revolutionised the way RIIO is a game changer for your business 4% 12 | 24th - 30th January 2014 | UTILITY WEEK 11% 18% 56% 11% Riio is a game changer for your role 4% 18% 22% Strongly disagree Disagree 37% Neither disagree/agree 19% Agree a agree Riio is a game changer for your business 80 70 60 50 40 30 20 10 0 Change and challenge Utility Week and EC Harris asked respondents to indicate how much RIIO would change their business and their personal role. Over half of the survey respondents agreed that the new regime will be a game changer for themselves personally and for their organisation. Respondents from the electricity sector were strongest in the view that RIIO will be a game changer, with more than 70 per cent seeing it as such, compared with gas's 56 per cent. companies approach the business planning process, while involving less change on an operational basis. "The framework is not that different – what is different is our behaviour. There will be much, much more stakeholder and customer engagement," he said. This distinction goes some way to explain why only 41 per cent of respondents agreed or strongly agreed that RIIO would introduce significant new risk into their business. 72% 67% 56% Overall Electricity sector Gas sector Significant changes in your organisation will be needed to succeed under riio 7% 4% Strongly disagree 30% Disagree 48% Neither disagree/agree 11% Agree Strongly agree