Think tank calls for "low regrets" shake up in utility regulation

Think tank Sustainability First has called for urgent change to utilities regulation – but for that change to be evolutionary rather than revolutionary, and to take a ‘low regrets’ approach.

In Circling the square: rethinking utilities regulation for a disrupted world published last week, Sustainability First said 30 year old utilities regulation is “struggling to keep up” with modern disruptive forces and is “well overdue an overhaul”.

The discussion paper proposed four steps.

Develop a utilities regulation road-map to 2030

This needs to start with a high-level vision for utilities regulation and show how this is aligned with relevant government plans such as the Industrial Strategy and UK delivery of the UN Sustainable Development Goals, as well as the advice of bodies such as the Committee on Climate Change and the National Infrastructure Commission.

Introduce "no" or "low" regrets evolutionary change to utilities regulation as a matter of urgency

This could include: more explicit and consistent government guidance such as Strategic Policy Statements; clearer and more transparent alignment of economic, social and environmental goals within regulatory decision making; and maintaining the current basic structures of separate utility regulators – but with greater consistency and collaboration where appropriate via augmented cross-regulator arrangements.

Produce an agreed set of basic criteria and principles to assess more fundamental future options for regulatory change.

This needs to be publicly agreed and firmly people centred – to build confidence in the reform process.

Develop a ‘Sustainable Licence to Operate’ for utilities sectors

Companies need to demonstrate leadership by embracing change and acting on their social and environmental commitments. This iterative process should highlight where more radical changes to regulatory structures may be needed.

Sustainability First director, Sharon Darcy, commented: “Many options for radical change have been put on the table, including the creation of "super" multi-utility regulators and a move to systems regulation. Many of these proposals for radical regulatory redesign may in time have real merit. However, change which isn’t sufficiently future proofed against a full range of public interest outcomes not only brings the costs of disruption but also risks new rigidities in the system and further failure for the utility landscape.”

The paper was a contribution to the National Infrastructure Commission’s review of utilities regulation.