Following the Autumn 2018 Budget, the Government has recently launched a consultation on how to encourage greater innovation in the utilities sectors. Amongst those measures is a review by the National Infrastructure Committee (NIC) into the operation of UK regulators and the potential establishment of a multi-sector "super-regulator" for utilities. This possibility has raised questions for stakeholders at all levels of the utilities sectors.
What are the challenges with the UK's current sector-specific approach to economic regulation?
The resounding concern is that the creation of a so called "super-regulator" does not actually address the most pressing issues in the utilities sector. The principle challenge is the delivery of decarbonisation and renewable/sustainable energy solutions at a sensible long-term cost while also protecting vulnerable customers. The challenge of technological change and convergence runs in tandem with this.
What risks or unintended consequences do we need to guard against?
The risks of such a major regulatory shift are stark. There is a risk that the creation of a monolithic super-regulator would restrict the diversity of views and the competition of ideas amongst regulators. Equally, there is a risk that there is a dilution of sector-specific technical expertise. This is not to mention the worry this may create amongst civil servants fearing upheaval and job cuts.
Establishing the framework for the regulator, including the level of independence and allocation of functions as between the Minister and the regulator, would be a task of considerable legal and political complexity. This reinforces a concern stakeholders have around political accountability. Currently, there is a belief that politicians are not candid about the state of government intervention in the sector and this may be exacerbated by a super-regulator.
An Unnecessary Disruption
Joined-up thinking amongst regulators, by giving the industry clear policy guidance, would be an encouraging step. This does not require the creation of a "super-regulator." Such a set-piece policy would cause too much disruption at a critical time for utilities sector.
The call from industry is for clear and coherent policy guidance rather than ad hoc interventionism. A "super-regulator" is not needed so much as innovative solutions from dynamic utilities regulators.
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