WPD urged to be ‘more radical or ambitious’ for RIIO ED2

The chair of the customer engagement group (CEG) for Western Power Distribution’s RIIO ED2 business plan has written to its chief executive, Phil Swift, to urge the company to be “more radical or ambitious” after the distribution network operator published an early draft last month.

Duncan McCombie, who is also chief executive of the fuel poverty charity Yes Energy Solutions, welcomed its “open and transparent approach” and “radical candour” but said most of its commitments only represent “incremental change from those currently being delivered in ED1.”

“Your approach of publishing at this time provides early sight of your plans and commitments, offering consumers and stakeholders an opportunity to influence the broader elements of WPD’s strategy, approach and outputs,” the letter stated.

“However, as the CEG, we also see this window of opportunity is beginning to close, as there is limited time for you to improve the business plan before you reach a near-final version in June 2021.”

McCombie said whilst the company’s engagement so far has been “more comprehensive and inclusive than for the current regulatory period”, the specific commitments made in the plan “appear to reflect WPD’s working practices rather than combining understanding of specific stakeholder input and the prevailing environment in which the plan will be delivered.”

He asked to know what will be “measurably different” for consumers and stakeholders at the end of the next regulatory period, saying the plan describes “the tasks the business will undertake, rather than identifying the outcomes and impacts you are seeking to achieve. Perhaps consequently, the volumes are mostly defined as growth from ED1, rather than justified from benefits outweighing costs.”

“We have yet to see sufficient consideration of alternative options, a shift in speed or greater ambition to truly reflect the nature and scale of energy system change which can be expected in the coming decade as we transition to net zero,” he added.

“Most commitments in your draft plan represent incremental change from those currently being delivered in ED1. However, in some cases more radical or ambitious commitments may be justified to deliver the required impact and enable the wider system change.”

Flexibility markets

“One of the things we’ve been saying is look in more detail at what you’re doing,” McCombie told Utility Week. “Don’t just give an ED1 cake with some ED2 icing on the outside of it…”

For instance, McCombie said WPD has promised to ensure they are able to connect the charging points that will be required for the mass rollout of electric vehicle but said they need to be “going far further than that, far quicker than that, getting far greater granular knowledge about how their networks work now to maximise flexibility, for example.

“So, flexibility mechanisms which allow them to work, which doesn’t mean copper, doesn’t return on capital value but does allow them to sweat the asset more without asking the customer for more money. They would need to put in a lot more remote monitoring to get that level of detail, certainly on their low voltage network and some of their high voltage network as well.”

McCombie recognised that WPD has been at the forefront of developing flexibility markets: “I think they’ve done a lot. I think they’ve probably got more tenders out than others but what we are encouraging them to do is say what is the next step.

“If you’ve done all you can on flexibility for now what is the next step. Where do we need to go? Certainly, personally, I have a view that if Ofgem gets involved in setting the market then the market is not going to be as free as it should be…”

He continued: “It’s about getting the data. They need to be very clear about their digitisation strategy, not just on recording numbers and providing them in a spreadsheet but actually making it really engaging and really usable by the end user so they can start to drive that market and help develop what in essence will be the DSO [distribution system operator] of the future.”

“We think there is more that needs to be done to help that market flourish…”

“Sometimes they just wait for the regulator to tell them what to do and they respond exceptionally well to what they’ve been asked to do. I think the regulator doesn’t know what the future’s going to give – none of us do really – and I think this is where some of them need to just put their head above the parapet and really say: ‘Let’s do this. If we get it wrong or doesn’t work as we expected, we’ll talk to the regulator and say actually we’ve learnt some lessons from that not working. We’ll do something different next time.”

Net zero target

McCombie said WPD also needs to be more ambitious about decarbonising its own operations: “We have seen a number of stakeholders say we want to get to carbon neutral and we haven’t yet seen WPD say they will, for example, follow the water sector, which has got a 2030 commitment. They’re still looking at 2043.”

He acknowledged that the water sector’s commitment is heavily reliant on carbon offsetting, adding: “There is quite a lot of offsetting and we’ve asked WPD to be quite balanced in their view about not just saying a headline grabbing 2030 by offsetting everything.”

On the other hand, McCombie said WPD uses far less energy in its operations than the water companies do in moving sewage and water around the country, meaning the task is smaller: “They’re never going to be able to get their helicopter fleet or the Landrovers that they need to get across difficult fields etc completely electric in the short space of time because the technology is not there but certainly the vans that they’ve got down the road could be electric.”

Responding to the letter, Swift pointed out that WPD is the first of the distribution network operators to publish a draft of their business plan and has done so ten months ahead of the final submission to Ofgem: “Our plan has been developed via an extensive range of co-creation events with over 4,500 stakeholders, but it of course remains a work-in-progress at this stage. We have consulted a further 500 stakeholders in the last month alone.

“We have published our plan as early as possible to maximise the opportunity for stakeholders to scrutinise and shape our proposals, as well as to suggest changes and additions. We will continue to test and refine our commitments over the coming months.”

“Our latest consultation is part of the process to ensure that our final business plan is as well justified as possible and has extremely high levels of stakeholder support and acceptance,” he added. “We are therefore confident that we are working to deliver against the CEG’s desire to see even greater stakeholder support and justification for each of our commitments.

“Indeed, we have committed to publish a second draft of our business plan in March 2021 which will outline the changes we have made as a result of stakeholder responses to our first draft. This will be subject to a second consultation.”

Swift said WPD is still considering the net zero target for its own operations and may move date forward to “as soon as 2028, which would demonstrate a radical and ambitious proposal.

“Similarly, over the last five years WPD’s fuel poverty programme has seen us deliver direct financial savings of £27 million to customers – around ten times higher than the average amongst other DNOs. Our current consultation is seeking views from stakeholders about whether we should go even further – by more than doubling our ambitions to deliver £60 million of savings to customers over the next five years.”