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Policy & Regulation UKPN director of strategy and regulation Ben Wilson said the most important element of innovation was its impact on the bottom line – on customer bills. UKPN, for example, has included £135 million of cost savings through innovation in its ED1 business plan. Nixon said she expected further, greater savings to come across the sector. Verbatim responses on being asked to describe "other significant areas of innovation for your company under the coming RIIO period" were wide ranging. Examples included: "Fulfilling social obligations – engaging communities and building relationships", and "bio-methane technologies and tablet/smart phones technology". On a scale of 1 to 5, how significant do you anticipate innovation will be for each of the following key business areas under the coming RIIo period? 100 16% Programme shift Respondents' assessments of whether RIIO might lead to a shift in emphasis to lowvalue work in their organisations' capital programmes were mixed. One-third of all respondents were not sure. Only the electricity transmission sector respondents clearly rejected the suggestion that there will be a move away from large projects, with threequarters disagreeing. No respondents disagreed with the statement: "I'm confident there is a clear link between RIIO-driven projects within our company's asset management plan and the work under the capital programme or supply chain" and agreement was at (or close to) 100 per cent in the electricity sector. Gas sector agreement was at 77 per cent. Commenting on the findings, EC Harris's head of Transmission and Distribution, Greg Bradley, said: "Long-term visibility of asset management requirements combined with an eight-year control period presents a major opportunity to look at delivery operating models in a different way. Collaboration with the supply chain will enable innovation, sustainable cost reduction, and efficiency improvement". Conclusion There is no doubt that RIIO is a game changer for networks. Yet despite the scale of change expected over the next few years, networks are confident. They say they have prepared well for the new regulatory approach and 24% 44% 60 48% 28% 20 40% 28% 56% 52% 12% 4% 12% 4% 20% Demand side sustainability 28% 4% 0 Safety Network upgrades 32% Asset management Smart technology 40% 44% 40 Capital programmes Outsourcing has significant implications for an industry confronting new risks and challenges, particularly when customer service has a new, high importance – as with RIIO. With this in mind, we asked respondents how they were changing their capital programmes in response to RIIO. We asked their preferences in supply chain management and the reasons for their choices, and on the basis that any impact on capital programmes might have repercussions for the skills and experience of workforces, we asked respondents to assess RIIO's part in bringing on new skills and addressing the needs of an ageing workforce. 24% 80 1: Not at all significant 2 Customer service 3 4 40% 5: Very significant do not feel it entails major risks for their businesses. However, some areas are likely to be more difficult than others. Customer service, for example, is identified as one of the greater challenges. Networks are also quick to acknowledge that despite the strides already made, further innovation will be crucial in delivering their ambitions for asset management, smart technology and other crucial outputs. Another area of potential friction is supply chain management. While respondents acknowledged the need to change their approach to capital programmes under the RIIO framework, many expected to continue with their traditional approach to procurement. These and other assumptions may have to be challenged as networks live through the first price control period. As a "game changer", the RIIO regime puts a challenge on the utility to look at a number of things. It needs to consider its own organisation, how it is structured, what skills it needs, how it best engages with the supply chain, and how collectively it can manage its performance to deliver the outcomes its customers requires. To download a copy of the full report: www.utilityweek.co.uk/downloads "Networks are quick to acknowledge that despite the strides already made, further innovation will be crucial in delivering their ambitions" READY FOR RIIO: the EC Harris view "This review confirms a consistent and positive message across the whole of the UK transmission and distribution sector: all network operators have undergone a fundamental shift in their approach and mindset in preparing for RIIO. They have created investment programmes that are focused on delivering customer outcomes. Ofgem's recent draft determinations for RIIO-ED1 continue to challenge the industry on the need to deliver real benefits for consumers, while also delivering a sustainable energy sector at lower cost. The opportunity now is to focus on implementation and delivery of the RIIO plans which have been so carefully prepared, and the findings of this report show that as an industry, we should be optimistic about what will be accomplished in the years ahead" RIIO Game chanGeR OR busIness as usual? in association with UTILITY WEEK | 24th - 30th January 2014 | 15