Leader

How should NESO respond to its critics?

At 10.30am on Monday morning, Claire Coutinho announced she had given birth. Less than two hours later, the National Energy System Operator (NESO) released the long-awaited results of the investigation prompted by Coutinho’s airing of whistleblower concerns.

I’m not for a second suggesting there was a link but if the hope was that the former energy secretary would be too busy to notice, that was soon dashed.

When I first wrote about the misconduct allegations Coutinho raised, and the media furore they sparked, I predicted that the resulting report would be used as a basis for wildly contrasting conclusions – and so it has proved. Coutinho took umbrage at NESO’s headline assertion that the review, conducted by law firm Eversheds, had concluded there was “no evidence to substantiate the allegations examined”.

Most hot takes seem to either lean towards the shadow business secretary’s view or take the stance that while NESO has been cleared of the direct charges, the review delivers some harsh home truths.

In particular the NESO board has been urged to tackle the “disconnect” between its leadership and the control room and tackle a “culture of reputational sensitivity”.

That first point is clearly very important and is well evidenced by (unattributed) comments throughout the report. But I can’t help feeling that a similar exercise at any organisation would reveal similar frustrations. There is a long history of disgruntlement of frontline workers who feel their superiors lack any real understanding of the situation on the ground. It’s one of the reasons leaders who have risen through the ranks are so mythologised. But ultimately there are specific skills needed to run an organisation of thousands of people, especially one operating so much in the public eye.

Which takes us to that “reputational sensitivity” point. There are several references throughout the Eversheds report to what could be described as a risk averse culture. That’s nothing new in utilities but in this case the comments hint at a reluctance to issue an electricity margin notice except as a last resort. One references an “implicit understanding and expectation from the leadership to hear what they want to hear”.

The report stresses that there is no evidence of an operational judgement ever being overridden because of reputational concerns but does identify “a cultural environment in which the perception of external consequences may affect the timing and confidence with which operational warnings are issued, particularly in marginal cases”.

Ammunition for critics

This is catnip to NESO’s critics, who have long questioned whether it is a truly independent organisation. Clearly the way margin notices - and wider system issues - are discussed is ripe for review. But I confess I am struggling to see how NESO could please everyone. I’m all for transparency but what’s the point in couching a margin notice within dire pronouncements of the potential consequences? I suppose it could invoke a wartime spirit of mass demand-side response but equally doesn’t it risk imbalancing the grid even more by prompting a rush of panic charging?

I’m more interested in the extent to which NESO is reflecting the situation on the ground back to government. As our analysis overleaf makes clear, the clean power mission is still alive within government but does not appear to be the driver it once was. Surely this makes it easier for NESO to paint a more nuanced picture – both in private and by publicly asserting its independence?

Ironically one other output from the report that has been used as a stick to beat NESO is the issue of interconnectors flowing the wrong way when margins are tight at home.

This is an issue that NESO has spoken about publicly and was one of the reasons it backed a move towards locational pricing in the review of electricity market arrangements – advice the government duly ignore.

Basically, NESO is damned if it does say, and damned if it doesn’t.

I certainly don’t envy them the task of responding to this review.

The work must not be rushed. NESO is now just over two years old but there is a lot to reflect on from its short life to date. Its leadership must find a way to assert NESO’s independence and ensure its advice to government and communications with the public are rooted in the expertise of its people. It must speak clearly but confidently – recognising the challenges and opportunities inherent in the evolution of the energy system.

Crucially, it will need to start by looking inwardly. I know it’s hackneyed but in order for NESO to re-establish itself as Britian’s trusted voice on energy, it first needs to ensure to trust is rebuilt between the control room and the boardroom.