Utility Week

COMMENTARY ON REGULATORY DISRUPTION Laura Sandys, ex-MP, entrepreneur, and chief execu ve of Challenging Ideas, says: "Disrup on is the new norm and regula- on and policy are having to face in two different direc ons at the moment. It has to look back and deal with the real legacy issues while also having to look forward ensuring that innova on and be er consumer preferences are not squeezed out under the weight of managing the past mistakes of the sector. "We need a very different form of regula on as we move forward – one that drives a more op mised system reducing waste within the system. We need to allow the market to find be er solu ons that might blur some of the ar ficial boundaries created at priva sa on, reducing the cost of the system thereby providing be er value to consumers. "Much of the innova on will be driven by the range of people who could supply energy to the consumer – from their car company through to their white goods provider or their local authority or a home services company. We must not stop this happening as this will truly shape be er products and services to consumer however this 'mixed' and 'blurred' energy economy will pose new challenges to regula on to ensure that consumers are protected however they buy energy. The next era of regula on needs to open up con- sumer preferences – not second guess what they are – but shape a system that allows drivers of cost reduc on to put price pressure on the system. "In addi on, data flows and op misa on will have a radical impact on the cost and waste within the system. Data is revolu on- ary if it is allowed to play its role in reshaping how, what and at what cost energy is provided. It could not be a more exci ng me for energy and more importantly for consumers of the product." An Ofgem spokesper- son says: "The energy system is in a me of huge transi on – renewables, especially solar, are really coming to the fore – de- ployment of small-scale solar has been far above all expecta ons. "We're working towards a smarter, more flexible energy system, which will make the most out of new technologies, such as ba ery storage. We want regula on to break down barriers, not create them. Similarly for DSR, for businesses and individuals. We want regula ons to be in place so that nothing stands in the way of this. "With RIIO2, the clear message is that price con- trols will be tougher, but we also want to make sure there is enough support for there to be high levels of innova on – higher than we've seen before. "What's important to us is that we make sure the price controls provide strong incen ves for companies to invest, but also that there are specific funding controls in place so companies are able to really innovate to the best of their ability. We want innova on to be part of the everyday job for com- panies, and we want them to be less reliant on these specific funding methods. "We have also ques oned whether the supplier hub is fit for purpose – in future there will be new business models with new frameworks, such as peer-to-peer trading and blockchain, and regula on needs allow that to thrive, not restrict it." Alterna ve op ons While many significant regulatory disrup ons are today emana ng from exis ng regulatory bodies and their evolving frameworks, it must be acknowledged that there is also increasing scope for these ins tu ons themselves to be irrevocably disrupted in the near to mid-term future. Labour's pledge to rena onalise u li es – including energy supply, energy networks and water networks – has created the scope for a radically different future for the sector, and one which would unwind almost 30 years of making compe ve markets deliver cost-effec ve and reliable u lity services. Details have so far been scant on how Labour's rena onalisa on plans would work in prac ce, but a January report on alterna ve models of ownership suggested a blend of na onal state, local and community ownership for Na onal Grid and other electricity and gas sector infrastructure. The boards running the companies would be split between state appointees, local and devolved administra on government nominees, consumer, and employee representa ves. Despite the protesta ons of shadow chancellor John McDonnell, it's likely rena onalisa on would be a costly business and, as Sco Corfe, chief economist at the Social Market Founda on (SMF), says it is "pre y unclear" how exis ng owners would be compensated. The SMF published a report in February seeking to quan fy how much Labour's plans to take back control of water companies would P R E S E N T S 10 | 6TH - 12TH APRIL 2018 | UTILITY WEEK P R E S E N T S

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