Weekend press round-up: Brearley urges networks to embrace ‘collective spirit’

In our latest round-up of the weekend’s papers, Ofgem chief executive Jonathan Brearley urges networks to embrace the “collective spirit” as the regulator reins in their profits for RIIO2, Thames Water comes under the spotlight for payments made to former chief executive Steve Robertson and environmental groups raise concerns over planning changes being brought in to hasten the economic recovery from the coronavirus.

Energy firms need to take the public with them to build a greener future

Ofgem will this week set out a five-year multibillion-pound investment programme — funded by consumers — to build a greener, fairer energy system.

This is an opportunity for the energy industry to play a key role in Britain’s recovery following Covid-19.

Huge investment is needed in the grid to charge millions more electric vehicles and connect more renewables to hit the 2050 net-zero emissions target set by the government. The costs are ultimately borne by consumers, who pay about £250 a year on average, or a quarter of their energy bill, for the networks.

In an economic downturn, it’s even more important to bring forward this investment at the lowest cost to consumers.

Ofgem, as energy regulator, is seeking to strike a fair settlement for the energy industry and consumers that helps Britain deliver on its ambitious climate goals.

We recognise that building a flexible, digitally connected, low-carbon energy system is a significant challenge that requires the industry — and the regulator — to take risks and innovate.

Our regulatory framework will help network companies invest upfront in infrastructure — so that the electric vehicle revolution, for example, is not held back by a shortage of charging points.

Companies are also invited to bid for additional funding as new technologies emerge so that we can get to net zero in the most efficient, smartest way.

In return, companies will have to reduce their ongoing costs significantly and accept much lower returns.

This means that more of consumers’ money will go on building the network rather than ending up in investors’ pockets.

The proposed price control settlement, which takes effect in April next year, will go out to public consultation before we make the final decision in December. This time we must get it right.

The National Audit Office concluded that under the current price control settlement, while network companies have provided a good service overall, consumers have paid more than they should have, partly because returns have been too high.

Now more than ever, the bargain that we strike on behalf of consumers needs to be fair in the eyes of the public.

Companies are asking to spend more of consumers’ money to build a low-carbon energy system — when many are struggling financially.

When companies respond to the proposed settlement, they should be mindful that it is in their interests to maintain this social contract and public trust in the system of network regulation that underpins it.

By accepting a more balanced settlement this time round, they can help maintain the public support needed to meet the country’s climate goals — and secure their role in delivering them.

The energy industry more widely has an opportunity to build public trust. Working closely with government, Ofgem and consumer groups, it has played a key role in the national response to Covid-19. I want to thank the industry, especially frontline staff, for helping to protect customers, including the vulnerable, and maintaining energy supplies.

The trust of customers in their supplier appears to be stronger as a result. According to research carried out by PwC in April, 82% of customers aged over 65, and 67% overall, stated that they believe their supplier will provide support if needed. This compares to a government sentiment tracker last year that put general levels of trust in energy suppliers at 41%.

Companies that earn the trust of their customers will reap the rewards. These customers are more likely to buy new products and services such as smart chargers that cut the costs of charging electric vehicles. As well as being good for companies’ bottom lines, this will help accelerate the transition to a low-carbon energy system and keep down costs for all energy users.

We hope that the industry continues to do the right thing by its customers and has learnt the lessons of what happened following the last big economic downturn in 2008, when some suppliers engaged in sharp practices and overcharged customers who did not switch. At that point, energy companies were among the least trusted in the UK.

Ofgem responded by clamping down on suppliers that did not treat customers fairly, and the price cap was introduced to ensure that those who do not switch pay a fair price for their energy.

If sharp practices creep back in, Ofgem will not hesitate to take enforcement action against any company that breaks the rules.

The proposed settlement we will set out this week will open up the energy system to global investment so it can deliver a low-carbon future for the country.

If the energy industry embraces this opportunity, provides value for money to consumers and treats them well, it can play a central role in the recovery — creating jobs, economic growth and new business opportunities.

So, in the difficult months ahead, I urge the industry to apply the same collective spirit that has characterised the response to Covid-19 and work with us to help get Britain building and to protect consumers from climate change as well.

Jonathan Brearley, chief executive, Ofgem

The Times

Thames Water former boss handed £2.8m since being sacked

The former boss of Thames Water has been handed £2.8 million since leaving the company, despite being sacked for leakages and fines while in charge.

Steve Robertson, who stopped working for the company in May last year, was given a £2 million payoff for losing his job on top of £777,500 paid to cover his 12-month notice period.

He had been asked to leave by the board of the UK’s biggest water company, which serves 15 million people, after a row over his failure to reduce leakages.

Details of the payout come after the Guardian revealed that raw sewage was pumped for more than 1,000 hours from a Thames Water overflow pipe into an environmental wetland at the Olympic Park in east London last year.

Robertson, who had led the company since 2016, was ousted amid embarrassment on the Thames Water board over its record on tackling leaks. Ofwat, the water regulator, fined Thames £120 million in 2018 for poor management of leaks and said the company had “failed its customers” as it breached two of its legal responsibilities.

Water companies have faced mounting scrutiny over their failure to tackle leaks and offer consumers value for money, while paying out vast sums to investors and executives. Before December’s election, Jeremy Corbyn promised to nationalise water companies to prevent consumers from being ripped off in future.

Luke Hildyard, director of the High Pay Centre thinktank, said it was clear vast increases in executive pay since the privatisation of water firms and other utilities had done little to improve performance.

He said: “This case highlights two of the most pernicious aspects of the economic philosophy that has guided UK policymakers for the past 40 years: the sale of public assets for short-term gain and a naive faith that the executive class will bestow prosperity on the rest of us.”

A spokesman for Thames Water said: “Our customers will not pay for this. While with us, Steve Robertson received no bonus for two years as we prioritised investment in improving service for customers.

“His payment for loss of office, which was calculated with his incentives and performance in mind, was funded through earnings generated outside the regulated business. The money would otherwise have been due to our shareholders.”

The Guardian

English countryside ‘at risk from Boris Johnson’s planning revolution’

The English countryside and its wildlife are at serious risk because of Boris Johnson’s pledge to revolutionise the planning system, leading green groups warn today.

In a joint letter to the Observer, the organisations, which include the National Trust, the Royal Society for the Protection of Birds (RSPB) and the Wildlife Trusts, say wide-scale deregulation leading to lower environmental standards and less protection would be a betrayal of promises by Johnson and Michael Gove to deliver a “green Brexit”.

Such backtracking, which they fear is imminent, would also damage the UK’s reputation in the battle against climate change. The prime minister last week pledged to stimulate economic recovery after the Covid-19 crisis with a “build, build, build” strategy, adding that he wanted to drive through the most radical changes to the planning system since the second world war to ensure fast progress.

But green organisations say weakening planning and protections, including the role of local people in shaping developments, risks setting voters in the shires against the Conservative government – alarming many Tory MPs in the process. In 2011, David Cameron’s government faced the wrath of the shires as the Daily Telegraph mounted its “Hands off our Land” campaign in protest at attempts to change planning laws.

In terms that reminded environmentalists of Cameron’s pledge to ditch what he called “green crap” – having campaigned on a green Tory manifesto in 2010 – Johnson blamed red tape and over-regulation for hold-ups in development, saying: “Newt-counting delays are a massive drag on the prosperity of this country.”

Downing St, under the direction of the prime minister’s chief adviser, Dominic Cummings, has issued orders in recent weeks to several government departments to come up with ideas on how to slash “red tape” and make sure big building projects can be pushed through in what is known in Whitehall as “project speed”.

Despite having promised to maintain high environmental standards post-Brexit, there are now fears of a government U-turn that will see ministers drop laws on the protection of habitats while promoting plans that would see more carbon-generating projects, many for new roads.

In their letter, the green groups say: “There are rumours of forthcoming deregulatory measures, including those that weaken laws to protect habitats and wildlife. Furthermore, the government’s flagship environment bill has been delayed and its new body to enforce environmental laws after Brexit will not be ready in time. This will considerably weaken our environmental protections.

“Countless reviews, including those commissioned by the government itself, have shown that environmental laws guide good development when implemented well. There is no public appetite for deregulation, with 93 per cent of Conservative voters wanting to maintain or strengthen protections for habitats and wildlife.

“Rebooting our economy needs to be done in a way that doesn’t exacerbate the current environmental and climate emergencies. Ripping up important laws and lowering our standards would be a betrayal of previous commitments and reduce our international standing.”

The Guardian

Let’s insulate the nation’s leaky homes for a green coronavirus recovery

After an incredibly challenging four months, we must now look forward and build back better. The task of rebooting our economy, levelling up opportunity across the country, and delivering our environmental commitments is, without doubt, enormous. We have a chance, however, to make our economy more resilient to the challenges of the future, to make our homes, schools, hospitals and care homes warmer and cheaper to live in, to repair our relationship with nature, and to bring green manufacturing jobs to the north of England.

I support the prime minister’s commitment to this vision in his recent speech, and hope that the chancellor will announce concrete measures that make it a reality in his statement this week.

Communities such as mine in Colne Valley want to grab this chance with both hands. New polling conducted by Ipsos Mori on behalf of the Conservative Environment Network shows there is strong support for a green recovery in the north of England. If the government does not tackle pollution and climate change as part of the recovery from Covid-19, 68 per cent of people in the North believe this would show that ‘the government has the wrong priorities’, and 71 per cent feel it would be proof that ‘the government doesn’t listen to ordinary people like me’.

Six in ten northerners believe that tackling climate change as part of the recovery will create new jobs and boost the economy. This is unsurprising, perhaps, given that the low carbon economy is a real success story in our part of the country. To list some examples, Sunderland is home to the Nissan Leaf — the flagship Nissan electric car model. This electric vehicle production line employs 6,000 people and has recently been bolstered by a new deal with Uber, which will help to reduce air pollution in cities. Siemens, a manufacturing giant in Hull, is building blades for the world’s largest wind farm at Dogger Bank, 130km off the northeast coast of England. And the North West is set to lead the UK’s hydrogen economy with a HyNet low carbon hydrogen production plant.

With the right government backing, businesses in the north of England are poised to ensure this success story continues as we recover from Covid-19. Through prioritising green infrastructure projects and green job creation, we can combine economic and environmental goals and bring new industries to our towns and cities. Levelling up is not just about creating jobs now, but investing in long-lasting, highly skilled work and new infrastructure that brings wider benefits and improvements to local communities — whether it’s tackling air pollution, bringing the cost of living down through cheaper clean energy, making homes warmer and more comfortable to live in, or enhancing our green spaces and wildlife.

One opportunity that offers multiple benefits is a major home energy efficiency programme. Asked to choose from a list of areas that should be prioritised for job creation, energy efficiency (36 per cent) came second only to renewable energy (44 per cent) among people in the north of England. Analysis by the Energy and Climate Intelligence Unit think tank shows that areas such as Yorkshire and the Humber have the greatest potential for job creation in home energy efficiency.

Just over 23 per cent of the workforce in the region are on the furlough scheme, many of whom work in the construction sector. At the same time, the proportion of homes that fall below the government standard of an energy performance certificate of D in Yorkshire and Humber is roughly 67 per cent. There’s a compelling opportunity to address both these challenges by prioritising an energy efficiency scheme as part of the recovery plan, to create new construction sector jobs and upgrade leaky homes.

Jason McCartney, Conservative MP for Colne Valley

The Times

Utility Week’s weekend press round-up is a curation of articles in the national newspapers relating to the energy and water sector. The views expressed are not those of Utility Week or Faversham House.