Utilities and utility regulation are facing dramatic change. The Labour Party wants to bring public ownership back. Local government is seizing the initiative, using utility services to leverage development. Meanwhile, new consultations could see the shape of the regulatory landscape change for the first time in decades. With the help of market research company Accent, New Power sought views on these issues from our expert forum.
We asked five questions addressing how the public and private sector, and regional and national bodies, can work together to help the energy sector become more distributed, greener, smarter and more flexible. Subscribers can login to read e full report in the April issue.
This week we present some of those comments and we’d like to add yours.
Q2 What lessons should we learn about public or social ownership from previous experience?
As a supplier?
“Any supplier needs to be able to manage wholesale price risk through hedging – local authorities should only play in supply if they have this “.
“have enough sunk or working capital. [Our Power] had the challenges of both private and public sector but none of the benefits either gives.”
“Being a supplier is complex and entails risk. At least initially a publicly owned supplier should only white label power from an experienced, capable and strong private supplier.”
As a system operator?
“Publicly owned local systems have been developed with access to low cost, long term finance, and can typically proceed with lower internal rates of return (IRR), enabling higher rates of investment.”
“In the UK overall there is no systematic policy framework or local statutory responsibilities for municipal-led energy initiatives.”
“Community generation may be managed by volunteers to an extent, but it still needs money to pay for technology and engineering services.”
But
“Government or local authority owners are incapable of properly managing complex utility services. … public ownership is neither transparent nor accountable. Frequently decisions are made on a short-term basis to further political ends that either have nothing to do with the customers or actually detrimental to the customer.”
“Many of the new energy models will be built around ‘places’ that just can’t be managed nationally or remotely.”
“Initiatives should be commercially viable, not a means of providing social subsidies.”
“Public ownership will also bring with it the need to make substantial capital investments in different types of asset where the risk of those assets being stranded in the future is very real.”
Public ownership “usually ends up with inefficiencies due to too many layers of management, repeated reorganisation”
What’s your view? Use the comment box below to add your voice
Further reading
In water, it is clear that some public ownership arrangements work better than others. Scottish Water is publicly owned but run as a business. The Scottish Government sets objectives and provides some finance, but crucially there’s an independent regulator who oversees six year long price controls, giving SW certainty over both its income and what it is expected to deliver. The model has worked well and enabled SW to deliver a comparable level of service to privately owned English water companies, despite starting in a much worse position. Northern Ireland Water is publicly owned but struggles with annual budgets from government – hence little ability to plan ahead – and, even worse, has to compete for funding with hospitals, schools, roads etc. Needless to say it commonly loses out with a knock-on impact on the services it is able to provide.