Setting a new direction

Newly appointed Utility Regulator Jenny Pyper looked at the future challenges facing her in her new role at the recent Northern Ireland Energy Forum.

Jenny Pyper was speaking at the Northern Ireland Energy Forum having been eight days in her role as Utility Regulator. She comes to the role after spending three years as Deputy Secretary in the Department for Social Development. Her work at that department in the areas of urban regeneration and social development has given her a different perspective: “Working on issues facing vulnerable and deprived communities was a real insight after spending 25 years working on economic policy.”

Pyper was head of energy policy before she went to DSD and reflected on progress in the energy sector in the three years since leaving DETI. When she left the energy sector in 2010 the Single Energy Framework was just published “which was then the best assessment where energy policy was going” and in the convening three years there has been a string of major developments including the energy retail market opening and Europe’s IME3 package on market liberalisation. There has also been a major piece of infrastructure investment with the East-West electricity interconnector between Dublin and Wales and the penetration of renewable energy onto the electricity grid has increased from 8 per cent to 15 per cent. The single Electricity Market (SEM) was a major issue when she left DETI and the market, now six years old, faces the challenge of European electricity market integration which will require a new target market model being introduced by 2016. The Utility Regulator will shortly be launching the competition for Gas to the West.

After listing these major developments, that reflect the changing nature of the energy sector, Pyper highlights two areas where progress has been slower. The North-South interconnector “which was a key factor in the development of the single electricity market” and the Common Arrangements for Gas “which has not progressed as quickly as we would like liked.”

Regulator’s in-tray

The newly appointed regulator reflected on where Utility Regulator is as a non-departmental body “but whose work does contribute to the work of the Executive and the wider Programme for Government”. Pyper says that the work of Utility Regulator is “extensive and complex” and sits between three connected dimensions: environmental, social and economic. “We operate at the centre of these. We have influence on environmental issues. For example, we have approved £30 million of grid investment to allow connection of wind generation. Clearly there is a huge social impact of our work, particularly around fuel poverty. There is also an overall duty to protect the interests of consumers. In economic terms we facilitate the investment in energy and water infrastructure.”

Looking forward, Pyper says she is taking up her post at an “interesting time”. There is a new Utility Regulator board with the Finance Minister appointing David Strahan, Harry McCracken and Theresa Perchard “who all bring a wealth of industry and consumer perspectives to the board.” At the time of speaking at the forum the Competition Commission had just published its provisional determination on Northern Ireland Electricity’s price review. “We have experience of two Competition Commission referrals and there are lessons for all of those involved,” observes Pyper. Amongst the other challenges in her in-tray is the impact of Ed Miliband’s focus on energy prices and also his highlighting of the need for a pool-type market in Great Britain: “Whilst not wanting to be complacent we have a good transparent pool arrangement on the island with the Single Electricity Market. We have also regulation of domestic supply prices whereas GB has fully open markets.”

On the price issue, Utility Regulator recently initiated work on understanding the drivers of energy prices. Pyper says that the level of understanding of the future drivers of costs in the wholesale, network and retail segments of electricity prices has led to a “healthy level of debate and we have had some good dialogue with the Assembly’s Enterprise and Trade Committee.”

Security of supply is a “massive” issue both of Great Britain and here in Northern Ireland. SONI (System Operator Northern Ireland) published its generation adequacy statement earlier this year which shows tight margins from 2016. “Utility Regulator is working closely with DETI and SONI to identify the best way forward to protect consumers’ interests.”

All of these challenges are being fed into a new corporate strategy which will be in place in the second quarter of 2014. The strategy will focus on “three big objectives – regulation of monopolies, competitive markets and security of supply. But protecting the interests of consumers has got to be at the core of the strategy,” says Pyper.

In coming into the role, Pyper asked to see some of the feedback from consumer and stakeholder engagement which had taken place some months earlier. The feedback focused on issues such as prices, security of supply, regulation and competitive markets. “These are all about what the regulator does. But for me some of the more interesting feedback was about how we work, with comments about more transparency, better engagement and better explanations. That is something we want to reflect further on as we bring forward our new corporate strategy.”

In taking up the role Pyper also looked at the organisation’s mission, vision and values. “In looking at how we go about our work, I really do see continued validity in that mission and vision and in particularly those values, which chime with the values I subscribe to as a public servant in the Northern Ireland Civil Service. In leading Utility Regulator I will continue to embrace those values.”

In moving forward with a new corporate strategy, some of the elements of a “new direction are clear,” says Pyper.

“We want to be known for best practice regulation. We do expect our regulated companies to progress and improve and we also want to meet the challenge in terms of the principles of economic regulation. Coming from a DSD background where the only way to make progress on issues such as poverty and deprivation is by working in partnership and collaborating with stakeholders.”

Pyper concludes: “The Utility Regulator operates across a wide range of interests and it is vital we continue to deliver on outcomes that benefits consumers, industry and Northern Ireland PLC. We want to focus on outcomes around regulating monopolies, competitive markets and security and sustain