Utility Week

UTILITY Week 11th September 2015

Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government

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Page 6 of 31

UTILITY WEEK | 11TH -17TH SEPTEMBER 2015 | 7 Interview I t's taken three years of asking to get Mark Horsley to agree to today's interview. Not because he's too grand to talk to the press, or because he hasn't got anything to say – neither could be further from the truth. But because aer a career of dizzying highs and the odd bruising low, the down-to-earth, friendly chief execu- tive of Northern Gas Networks (NGN) has decided it's best to stay under the radar, at least as far as the press is concerned. So what are we doing here, meeting Horsley at a quiet cafe in the sprawling hotel over the road from his Leeds business park office? Perhaps it's a pay-off for Utility Week's persistence. More likely, Horsley has realised that just as gas, once the "silent sector" of the energy world, is having to speak up for itself, so must he. And a good thing too, because he speaks a lot of sense – and he does it with a degree of passion and conviction that stands out even in the public service-driven world of utilities. In a gas sector that has recently found its voice and its confidence, NGN is a smaller player that punches well above its weight. The business, owned by Chinese inves- tor CKI (of which more later), has a relentless focus on customer experience; Horsley has pledged to complete the network's transformation by 2021, to deliver a "revo- lutionary" business model based on ways of working that would once have been unthinkable for a staid util- ity. He is also chair of the Energy Innovation Centre, and passionate about change across utilities and the wider business world. NGN is performing well. It delivered an operating profit of £175 million in 2014, on a total revenue of £409 million; compared with an operating profit of £162 mil- lion in 2013. It is the leading gas network on complaints performance and has attracted the notice of the regu- lator and other businesses, in and outside of utilities, particularly for its ability to speed up change in a tradi- tionally slow-moving sector. The company was the most efficient on repex (replace- ment expenditure) throughout the last price control period and has a unique approach to contracting, work- ing directly with 26 small organisations across its area. Efficiency has subsequently improved by a further 10 per cent as measured by the Ofgem model. It has taken all its training in-house and has 60 per cent of staff on mod- ern terms and conditions. Improvements to the way that works are planned and delivered have increased the effi- ciency of the average repair team by one-fih (two-fihs for those on modern T's and C's). The company claims its benefit-led approach to making investment decisions is reducing risk while delivering cost savings. It's been a long road. When Horsley joined NGN in 2011, most of the network's operations were outsourced to United Utilities. The decision had been taken to end the contract, and he was there to implement it. "It was number one for efficiency. I knew that by bringing the contract back in, we would probably lose that posi- tion. We really needed to bring the thing together. It did mean making some hard decisions and it did reduce headcount." The winter of 2010/11 was extreme, and NGN suffered as a result. "It was the worst winter you can imagine, which resulted in a breach of licence [on reconnection times], and our repex programme was touch and go whether we would make it, so there was a real focus in two directions. One, keep the operations going as best we possibly could knowing that we had already breached the one hour and two hour standards with no recovery; two, looking at the business overall." Over the next 18 months, Horsley overhauled the sup- ply chain and management team. "New managers were brought in reflecting what we really wanted – a highly efficient, safe, customer-focused business." To create that focus, Horsley dragged the management team in for a weekly 7am meeting on a Friday to talk through health and safety, interrogating any accident that had hap- pened that week. At 8am, the same for customer service. Horsley's passion is about changing NGN from a tra- ditional, staid utility, to deliver a better experience for the customer (and ultimately, the shareholder and staff). As he proudly shows Utility Week around his HQ, pull- ing in staff members fizzing with energy and showing off team whiteboards and a shared wall in the coffee room where once-tortuous change programmes are boiled down to Post-it notes and progressed from le to right, the changes seem logical and intuitive. So what's the vision for 2021, the end of the cur- rent price review period? "A highly focused, customer orientated business – much more agile than it is at the moment; less corporatised, predominately locally driven and real, real colleague involvement in what we're doing. And a conscious business – that's breaking down what you typically have as a hierarchical approach to busi-

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