Leader

Local jobs or low bills: Can you have both?

In my experience there are two ways for utilities to get the (right kind of) attention of politicians – promising local jobs and/or lower bills.

But is it possible to have both?

This is currently the subject of much debate acrosS utilities – but particularly within electricity networks, with the publication of the sector’s growth plan due imminently. One of the knotty questions this will have to tackle is whether networks can do more to support domestic supply chains while keeping the impact on bills as low as possible.

Last week we got more of an insight into their thinking, with the publication of responses to an Ofgem call for input, launched in March, on supporting the supply chain. This sought views on a variety of a fairly high level ways networks can contribute to the mantra of the moment – growth – as well as getting into the weeds of how this value could be evidenced.

But it was around the topic of local supply chains where some interesting tensions were laid bare. While reactions to this were by no means universally negative, there was a clear message that buying local will ultimately cost the billpayer more in the short term. Concerns were also raised about the risk of a “bidding war” developing for the capacity that already exists – achieving the double downer of driving up costs while not actually increasing the UK’s share of the overall supply chain.

It comes as government guidance seeks to push networks even further, noting that discussions around the sector’s growth plan currently focus on a 10% “social value weighting” for all procurement. However, central government contracts worth more than £5 million already carry a 20% social value weighting. The guidance make it clear that Ofgem and networks should upping their ambiton and working towards that target.

The government document is a classic policy fudge, admitting such a move would have a “short-term cost trade-off” but giving Ofgem very little guidance on how to resolve that.

It’s one of many dilemmas and trilemmas the sector is looking to Andy Burnham’s government for guidance on. He has promised to lead both a ‘cost of living’ government but also to ensure all areas of the UK feel the benefit of the growth agenda. Easy to say, much more difficult to deliver.

If you’re interested in hearing more about this debate, join us at Utility Week Forum in November where we will be hosting a panel discussion on whether energy and water can be engines for growth. You can hear the views of Anglian Water, PA Consulting, SSEN and Water UK. Find out more and see the full agenda here.