“Jumbled” network reporting needs overhaul

A new regime of network reporting is needed to improve accountability and stakeholder confidence says Conrad Steel.

After years of work, hundreds of hours of negotiation, thousands of pages of analysis and two CMA appeals now dragging to a close, the dust is finally starting to settle around Ofgem’s three new ‘RIIO’ price controls for energy networks. Between 2014 and 2023, these deals will allocate around £70bn of bill payers’ money to maintaining and upgrading our electricity and gas infrastructure.

The priority for all stakeholders – including Citizens Advice as the statutory energy consumer representative – must now be to hold RIIO to account as it starts to be put into practice.

The need for ongoing open scrutiny was highlighted last week when it was revealed that networks could be receiving an extra £600m for a security upgrade. There may be good reasons for the adjustment, but this is the kind of decision that can’t be allowed to slip by unnoticed.  Dialogue and visibility can’t be allowed to lapse until next time the price control is set. The new stakeholder engagement incentive introduced by Ofgem helps. But there is a vital piece still missing: proper network reporting.

“Some of the individual reports are good, but these are hard to find and even harder to compare. Others are very poor.” 

Our report released today makes two things clear. First, the network sector will never function well or be properly accountable without proactive, comparable performance reporting. Stakeholders need to be able to find out easily whether the networks are delivering what they have said they would.  And second, this is not happening yet.

What exists instead is a hit-or-miss jumble of documentation based mostly on the companies’ own initiatives. Some of the individual reports are good, but these are hard to find and even harder to compare. Others are very poor. There’s a trend for highlighting comparisons to other networks on metrics where the company is doing well, and omitting the rest. One firm published an ‘annual stakeholder report’ with a  finance section which doesn’t include a single pound sign.

For three years from 2011 to 2014, Ofgem stopped reporting on network performance because of difficulties verifying data from the networks. Despite this, the companies were still receiving generous financial incentives on the basis of that data.

Ofgem is still working on guidance for how the network companies should report their performance (and is making good progress on the financial side). Citizens Advice’s recommendation is for a short, simple, comparable front page document, tightly drawn to showcase those areas where networks receive a financial performance incentive, which essentially provide a ready-made list of KPIs. We’ve provided a template for how this could look.

Beyond this, if the public is to have confidence in RIIO, companies need to develop a fresh approach to reporting based on five simple principles: accessible, simple, comparable, timely and non-whitewash.

Our recent work on regulated returns asks whether it’s right that network operators are making higher returns than hedge funds. If networks think the work they are doing is worth the money they make, they need to show customers why.