Commission calls for "real policy changes" on utilities regulation

1 Feb 2022 02:04 PM

The government recently (31 January 2022) published a policy paper in response to the Commission’s 2019 study on regulation, Strategic Investment and Public Confidence. This study highlighted that, whilst the current system of regulation had generated significant investment over the past decades, it was increasingly facing new challenges that it was not designed to address.

The government’s paper moves forward with action on some of the Commission’s recommendations, on updating regulator duties, setting a long term strategic framework for regulators, and exploring the role of increased competition in strategic investments. However, it falls short of fully endorsing the recommendations or agreeing to make the necessary policy changes.
Sir John Armitt, Chair of the National Infrastructure Commission, recently said:

“We welcome the fact that government has set out publicly its thoughts on the future of economic regulation.

“Among other things the government has now committed to issuing additional strategic guidance for regulators, reviewing their duties, and exploring increased competition in strategic investments. These commitments reflect the thrust of the Commission’s recommendations in these areas.

“Nonetheless, it is now over two years since we made these recommendations to government. We recognise that there have been significant issues in the regulatory space, not least for consumers facing rises in the price of energy, but this is a missed opportunity to ensure all regulators are straining every muscle to help achieve net zero and deliver for consumer interests. We need real policy changes rather than the promise of further reviews.”

Notes to Editors

The Commission’s 2019 report made eight recommendations to strengthen and update the regulatory framework for economic infrastructure, and to improve public and political confidence in it. They included:

• Government should introduce legislation by 2021 to ensure that, where currently missing, Ofwat, Ofgem and Ofcom have duties to require them to ensure their decisions promote the resilience of infrastructure systems and help achieve the net zero goal; and also require them to collaborate with each other to avoid contradictory regulation
• Government should introduce legislation, ahead of the next price controls, to remove any barriers to the use of competition in the provision of strategic enhancements to water and energy networks
• Government should set out a long term strategic vision for each of the regulated sectors, through strategic policy statements, within the first year of each Parliament, to support lasting plans and stable funding.