Respecting our privilege
It is a privilege to be involved in running the UK’s energy networks.
As custodians of critical national infrastructure, we play a crucial role investing in the cables, pipes and wires which power homes and businesses, drive economic growth and support the transition to a modern, low-carbon, flexible energy system. And we must all do this while delivering a service that is secure, reliable and represents value-for-money for customers.
Given these responsibilities, maintaining public trust is essential. That’s why the results of Utility Week’s opinion poll make for important reading, with some positives, particularly around customer satisfaction, but also some clear challenges. Not least a perception that a return to state control is a credible, or even popular, policy direction.
For privately-owned utilities, a natural reaction to this debate may be to go on the defensive. After all, those of us that work in the industry don’t need to look far for evidence of where responsible private investment is helping to drive down costs, increase reliability and improve performance.
In electricity networks, the evidence is powerful: costs on consumers bills are 17% lower than they were at privatisation and there are now 50% fewer power cuts compared to 2002. Alongside this, we’ve kept pace with the renewables revolution ensuring timely investment in key network upgrades and connections as the UK increased its low carbon electricity mix from 22% to 56% in the last decade.
Simply put, this is an industry that is working for Britain.
It is fair to say we need to convince our customers that this is the case. We must demonstrate our track record and the continuing benefits of private ownership. But to do so in isolation would miss the point entirely.
The message from public research is that society’s expectations of good business conduct have changed. As a regulated company delivering an essential need, it is absolutely right that society expects even more from us. More transparency, more accountability and better conduct.
It is not enough for network operators to simply be reliable, efficient and innovative. We must be all these things and more, taking forward a new vision for the sector, that demonstrates that we are acting in the public interest, fully and at all times. That means things like taxes, wages and ethics matter just as much as service and costs.
At SSEN, we have started on this journey. In 2014 we became the first utility to achieve Living Wage accreditation and were the first FTSE 100 company to be awarded the Fair Tax Mark, being open about our tax affairs and pledging to pay the right amount of tax at the right time in the right place.
It was encouraging to see Pennon join us in the Fair Tax Mark ranks recently and I hope they are the first of many utilities. Our view is that voluntary and company-led reform is a more powerful tool in addressing the legitimacy challenge than being corralled into action by a regulator.
Actions should not be limited to taxation. Opaque ownership models and complex financial structures are - rightly - being questioned and greater transparency demanded on issues from financial structures and dividends to employee diversity and pay.
SSEN has recently released a consultation on a transparent reporting package for RIIO2, setting out our view on an open and accessible reporting framework for regulated network operators as we approach the new price control. Covering service performance, financial performance and performance for society, it’s been developed as part of a series to address the five Citizens Advice principles for RIIO2 and we welcome all feedback before we present our view to Ofgem.
Delivering in the public interest will also mean increased localism. Recent work by the regulator in driving stakeholder engagement is welcome but, as we move to a flexible energy system, with decentralisation at its core, perhaps it is time that a bigger, more formal, role is given to communities in helping to plan their local energy future?
Through our plans for the transition to a Distribution System Operator (DSO) role we are actively exploring how to truly integrate localism into the networks.
As I said before, the UK’s energy networks are a huge success story and it is a privilege to help lead this industry. But as our legitimacy is called into question, we must respect that this privilege is borrowed from society and we must work every day to earn the right to retain it.
I welcome Utility Week shining a light on this debate and giving a platform for utilities to collectively explore areas of reform. Let’s rise up to the challenge.