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At a recent meeting of the Infrastructure Client Group I was pleased, but admittedly surprised, at the warm reception to the UK Regulators Network’s most recent consultation. Regulatory consultations are rarely this well received!
The title of our consultation, ‘cross-sector infrastructure, consultation on remedies’, may obscure the simple issue it aims to address: how do we make the process and costs of crossing over, under or near assets and apparatus of utility and rail networks easier, quicker and cheaper?
This process of ‘interacting’ with incumbent networks, and the challenges it brings, clearly resonates with infrastructure businesses.
I want to briefly explain why you should spend some time reading and responding to this consultation. But, first, who and what is the UK Regulators Network (UKRN)?
The UKRN is an alliance of the statutory regulators of utilities, transport, legal, health and financial services. It is a diverse group, and includes the ‘Ofs’; Ofgem, Ofwat etc. Many of us regulate businesses that own and operate extensive networks of pipes, wires and other apparatus such as electricity distribution or water networks.
As regulators, our focus is to deliver value for consumers. To do this we promote efficiency of networks when delivering their services, setting clear outputs that meet the needs of customers connected to them.
For some issues, we consider that a ‘cross-sector’ approach is best, bringing regulators together to consider problems from a wider perspective. This is why the UKRN was formed in April 2014. Since then we have undertaken a number of infrastructure-related projects among others.
In July last year we started to investigate concerns that dealing with incumbent utility networks when building or installing new infrastructure was a significant cost. Since then we have held an industry forum, issued a call for evidence and met with a range of businesses working on infrastructure projects. We now have some initial findings and some proposed solutions.
Overall, dealing with incumbent networks leads to excessive ‘frictional costs’. By this, we mean that finding out who to talk to, understanding the steps to reach agreement, receiving design approvals or site visits within the time agreed and being confident, overall, in the process to be followed does not always work well. In essence, this boils down to simple issues of clear communication and reliable service standards.
But we also found a number of positive and proactive efforts by networks to work with their clients, making it easier for both parties to co-ordinate works, and examples from other issues where networks take the lead to address problems.
We think that the problems identified can be resolved: and that utility networks and wider industry – the clients that cross their assets – are best placed to deliver these improvements. But, to do this, we have proposed some starting measures. First, a statement of five basic principles that make clear to clients and networks what to expect when ‘interacting’:
We also propose greater transparency though regular public reporting by networks of their performance, demonstrating how they’ve met clients’ needs and encouraging on-going improvement with interactions. Last, we’ve committed to return to this issue once our proposals have bedded in, to apply (we hope) one final phase of regulatory scrutiny.
Infrastructure networks are often mutually interdependent. This means that the benefits of making improvements in one sector are greatly strengthened if reciprocated across other businesses and networks. We’d therefore like operators of significant national or regional infrastructure that is not formally regulated by UKRN members to also consider participating in and adopting our remedy proposals.
We think that industry, collectively, is best placed to make interactions easier, quicker and cheaper. The UKRN consultation offers some measures to enable a self-regulatory approach. But, you may have a much better understanding of how to bring about these improvements and how our proposals can make real changes on the ground? We now need your views, expertise and commitment to support and ultimately lead this change. Our consultation is open until 16 July and we look forward to hearing your views.
John is an economist at the Office of Rail and Road, working in the Strategy Directorate across a range of rail policy issues and, in particular, on issues with a cross-sector impact through his active engagement with the UK Regulators Network.
Before working with UKRN, John specialised in consumers and markets in the utility sector.