Leader

Back to school

I was delighted to see our new prime minister announce an end to the “school uniform rip-off”, with plans to limit the number of branded items parents can be ordered to stump up for.

I probably would have been even more chuffed had the move been announced before the schools had actually gone back, meaning I’d already bought this season’s scholastic merch. Presumably we can look forward to further well-timed cost of living measures coming through, such as VAT abolished for fireworks on 6 November, a Drink Out to Help Out subsidy scheme in January and Jif Lemon’s market dominance finally being tackled on Ash Wednesday.

I come circuitously to my point that it all feels very back to school, doesn’t it, even if you’re not literally waving your kids off in their officially sanctioned polo shirts.

So, in the spirit of being back at school, here’s what I thought about on my holidays and what I expect this term will bring for utilities.

The weather

The obvious place to start, and as I have already opined during the summer, 2026 really does seem to be the year when you couldn’t fail to notice the climate is changing. Whether it can be classed as a wake-up call or not is still unclear but certainly there will be a range of consequences for utilities.

These will vary from the kneejerk, such as a far greater proliferation of air conditioning to potential long-term moves in areas the industry has long lobbied. These could include greater resilience of assets against climate change, more investment in agile back-up power generation by other industries, notably transport, a serious look at where future water suppliers will come from and greater incentives for behaviour change around both energy and water consumption.

Of course, there will also be a good deal more moaning about why the sun comes out for 5 minutes and the whole country goes into meltdown.

Which brings me to:

NESO

At the start of the summer, the average consumer was probably largely unaware of the National Energy System Operator. However, the organisation seems to have spent almost as much time on the front pages this summer as Prince Harry. As I wrote several months ago, the coverage has largely been touching on themes long discussed in the pages of Utility Week. These include the very real challenges and potential trade-offs inherent in balancing a grid dominated by renewables and some legitimate questions about whether NESO was properly set and resourced to deliver on the many responsibilities laid at its door. It’s good to see these topics being put to a wider audience, although there has been a slightly hysterical air to some of the reporting that seemed both unnecessary and slightly bizarre to me. It will be interesting to see if the Conservative Party continue to target NESO now that Claire Coutinho, who has been doggedly pursuing the cause all summer, has moved to the business department.

In the background of the media skirmishes of recent months, NESO has been getting on with the task of developing the scenarios underpinning the long-awaited Strategic Spatial Energy Plan. The milestone of submitting six potential pathways to the energy secretary was achieved this week (just about hitting the ‘summer’ deadline). Miatta Fahnbulleh now has the difficult task of picking one route for NESO to base the SSEP on. Given how influential this document will be to various other industry reform programmes, all eyes will be on her decision and what NESO does with it.

Public ownership of utilities

Andy Burnham gave a political masterclass last week in surviving a three-hour Q&A session without ever falling into the trap of committing to anything. However, the frequency with which he mentioned variations on the phrase ‘public ownership’ shows this remains very much a part of the plan for his premiership.

What this means for energy and water companies is still very unclear and has been the subject of much debate across the sector over the summer. While the implications seem most pressing in water, energy firms should not fall into the trap of complacency. It’s all too easy to spin a narrative that privatisation of utilities has been a failure when no one appears to be willing to stand up and make the counter argument.

Whether utilities like it or not, the debate about renationalisation is back with a vengeance and this time it is not being used as a vote winner or as a deliberate act of opposition to the government of the day. It is a core policy of a sitting prime minister with a healthy majority.

Water reforms

There has been increasing concern over the past few months that the change in prime minister (and in Defra secretary) has stalled the reforms to the water sector proposed in the Cunliffe Review. Burnham’s comments this week did little to change that view, with repeated references to that review being too limited. This is presumably code for ownership being out of scope for its recommendations. However, it is unclear whether Burnham or Angela Eagle support the other wide-ranging conclusions of the report.

Given that there was much in the review that united water companies, regulators and campaigners it would be a huge missed opportunity if all of this was sidelined in the pursuit of a different ownership model.

There is also the pressing need to prepare for PR29, or at least to set out how water companies will continue to invest in assets and start to deliver the new sources of water the prime minster has demanded. This work needs to start now but as it stands water companies don’t even know who they will be submitting their business plans to in 2029.

Investment

And finally…. The financeability and investability of the utilities sector is always a hot top topic but in recent months I have been hearing increasing concerns. Regulated utilities in the UK have long been considered a safe bet but with mounting uncertainty over many of the issues listed above, will this continue to be the case?

The simple fact is that investors in UK utilities, even those who have been involved for decades, have other places they could deploy their capital. Why would they choose this sector and this country when there are so many unknowns?

Burnham and his ministers have little time to waste now school is well and truly back. They have been clear that they want to see change. Now we need to hear from them exactly what this looks like and how it will be achieved.