Utility Week

10 | 27TH OCTOBER - 2ND NOVEMBER 2017 | UTILITY WEEK Event Conference report Utility Week Congress 2017 11-12 October, Birmingham Utility Week Congress 2017 With customer engagement, technological innovation and regulatory uncertainty all on the rise, these are 'interesting times' for utility companies. Utility Week reports from this year's congress. R egulation and customers. These two fundamental building blocks define the utilities industry, shaping the way companies are structured, the way they com- pete, the returns they are allowed to make and the way they approach improvement. But in today's industry conditions, the relationship between regulation and cus- tomers has come under unprecedented stress. It has become prominent in political debate and is susceptible to vigorous forces for change emanating from shiing societal and environmental interests as well as new technologies. This has made the interplay between regulation and customers unstable. The upshot is that utility companies – which stand in the middle of the regulator- customer dynamic – have been hit by price caps, downward pressure on returns and new rules to mitigate any negative impacts from technological innovation on social equity. This was the context for presentations and debate on the first day of Utility Week Congress 2017. Talk of regulatory change is oen accom- panied by complaints from companies that regulatory uncertainty makes it impossi- ble for them to plan and invest for the long term. But although some time was given over to this well-worn argument at Utility Week Congress, Ofgem chairman David Gray made an early move to quash such mutterings, insisting that "most businesses don't have certainty. They live in worlds of uncertainty and they deal with it… I think in the utilities industry, to pretend that you can provide cer- tainty, just because you have regulation, is a non-starter". Instead, Gray suggested, there should be more active and open dialogue between regulators and companies, about the ways in which markets and consumer interests are changing. He said this would help both businesses and regulators move away from trying to pursue long-term "no-regrets" bets and instead develop mechanisms for making frequent incremental changes, or to "trying- out" new ideas. failures as learning opportunities if this cul- tural revolution is to take hold. Steve Rob- ertson, chief executive of Thames Water, admitted this is a challenge he is currently tackling in his company, whose prominent recent failures on leakage and pollution earned the firm record fines. A more "principles-based" approach to regulation across energy and water should allow greater opportunity for testing new ideas for services or operational efficiencies, while the launch of a regulatory "sandpit" by Ofgem was welcomed as a positive way of testing the accessibility of the energy market to new business models and technologies. In the drive to enable utilities innovation and market transformation, however, speak- ers did not forget the needs of vulnerable customers. Prescriptive moves from Ofgem and Ofwat to ensure that customers less able to engage in markets are protected, were uni- versally welcomed. And there was agreement that regulators and companies alike must remain alert to the potential for new strains of vulnerability to arise as markets adapt to the demands of water scarcity, decarbonisa- Gray's comments reverberated in later sessions where the urgent need for a cultural revolution in utilities, so that "fast failures" are accepted as a positive characteristic of innovative business, was identified by speak- ers from water, energy and technology firms. Some speakers suggested that organi- sational leaders need to be more proactive about demonstrating their appreciation of Price caps Long-running uncertainty about the nature of the price caps which have loomed over energy suppliers for months was blown away over the course of the two days of Utility Week Congress 2017. On the first day, Ofgem revealed its plan to extend the existing price cap for prepayment meter customers to one million additional vulnerable customers this winter. As day two got underway, the government pub- lished its draft bill for a wider energy price cap, covering all default tariffs. Speakers representing suppliers weren't shy of addressing these de- velopments at Utility Week Congress. Eon UK chief executive Michael Lewis set out his belief that a market-wide cap carries more risks of creating long-term detriment than promise for consumer benefits. He insisted that a blanket cap "will reduce customer engagement in the market; it will reduce choice and it will reduce the opportunity for new

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