Dear Phil,

Over the last 20 months, the Customer Engagement Group, an independent group with specific and specialist knowledge, has been scrutinising, challenging and questioning the elements contributing to WPD’s business plan for 2023 – 2028, as you have developed it.  As we monitor the progress of your plan, our aim is to promote the best value outcomes for consumers and stakeholders, identifying their concerns and how well these inform the development of your approach and your commitments to them.

Late last month you published an early draft of this plan with an accompanying consultation document, setting out WPD’s proposals and seeking feedback from stakeholders on their priorities, needs and expectations.  We look forward to seeing how these views are accommodated within the existing wide-ranging and in-depth research feedback you have already gathered, alongside your own expertise as long-term custodians of the electricity network with extensive insight on optimising solutions to deliver the impact desired by consumers and stakeholders to meet future demand effectively and efficiently.  

Your approach of publishing at this time provides early sight of your plans and commitments, offering consumers and stakeholders an opportunity to influence the broader elements of WPD’s strategy, approach and outputs.  However, as the CEG, we also see this window of opportunity is beginning to close, as there is limited time for you to improve the business plan before you reach a near-final version in June 2021.  We therefore take this opportunity to clearly set out our views at this stage.

The following points aim to ensure further iterations of the business plan provide greater justification of how you consider the needs and expectations of consumers and stakeholders, and the significant changes your business must make to deliver net zero and embrace: digitalisation; decarbonisation; democratisation and decentralisation of the energy system.

1. Your approach to stakeholder engagement in preparation for the development of your business plan has been more comprehensive and inclusive than for the current regulatory period.  This gives you greater granularity of the needs and wants of stakeholders, but also sets an expectation those views expressed will be addressed in your final plan.  Currently, specific commitments made in the plan appear to reflect WPD’s working practices rather than combining understanding of specific stakeholder input and the prevailing environment in which the plan will be delivered.
    
2. We will be seeking to clearly understand what will be measurably different for consumers and stakeholders at the end of ED2, through the investments and initiatives you propose.  Most of the commitments at this stage are describing the tasks the business will undertake, rather than identifying the outcomes and impacts you are seeking to achieve.  Perhaps consequently, the volumes are mostly defined as growth from ED1, rather than justified from benefits outweighing costs.
    
3. We have yet to see sufficient consideration of alternative options, a shift in speed or greater ambition to truly reflect the nature and scale of energy system change which can be expected in the coming decade as we transition to net zero.  Most commitments in your draft plan represent incremental change from those currently being delivered in ED1.  However, in some cases more radical or ambitious commitments may be justified to deliver the required impact and enable the wider system change.  The CEG’s view is the options presented in the first business plan consultation are generally limited to scaling of proposed ED2 commitments and do not sufficiently explore stakeholder appetite for more fundamental changes in your approach and practices.
    
4. We look forward to seeing, in future draft business plans: the evidence and justification of costs; the consideration of a drive for efficiency and consumer and stakeholder perspectives on value for money (for example in relation to bill profiles).  This will allow bill payers the context and detail to fully understand the impact on their pockets.

You have provided the CEG with access to all levels of your business, leading an open and transparent approach for us throughout the development of your business plan.  We welcome this positive engagement and the radical candor of the discussions we have had at all levels.  We hope these comments will help as you consider the further development of your plan to best serve your existing and future consumers whilst providing sufficient justification of your decisions and commitments.  We look forward to engaging with you on the specific areas of the plan we are challenging on behalf of customers and stakeholders.  

Yours sincerely

Duncan McCombie
Chair of the Customer Engagement Group at Western Power Distribution

Phil Swift's Response

Mr D McCombie
Chair of the CEG at WPD

16 March 2021

Dear Duncan

I would like to thank you for your letter dated 22nd February and to say that I appreciate the work the Customer Engagement Group(CEG) is doing to challenge us to ensure our RIIO-ED2 Business Plan provides the best outcomes possible for our customers and wider stakeholders.

As you say, our first draft Business Plan was published on 27th January 2021 and was subject to an extensive stakeholder consultation exercise in order to refine it based on stakeholders’ views. We will also undertake a second consultation following our second draft publication of the Business Plan in March, prior to the third iteration to be submitted to the Ofgem Challenge Group (CG) on 1st July 2021.

Between now and the submission to the CG the opportunity remains for the CEG to continue to challenge us to improve our plan. Whilst our 1 st July plan is intended to be as complete as possible there will be an on-going opportunity for changes to the plan as we debate aspects with both the CG and the CEG until the final submission to Ofgem on 1st December 2021.

I welcome the views contained in your letter and feel they are helpful as we progress to finalise our Business Plan. I will now like to respond to the specific views you raise in the order as written:

1. I am pleased that the CEG recognises that our stakeholder engagement has been both comprehensive and inclusive. Our extensive consultation with our stakeholders continues and our commitments will evolve and be refined throughout this process. I think it is important to recognise our second draft Business Plan will reflect a transition from the first draft where we will move from ‘playback of stakeholder priorities’ to where WPD utilises its detailed knowledge to enhance the core commitments contained in the plan. This knowledge ensures that our stakeholders have a plan which meets their needs, is sustainable and of course remains challenging. Mr D McCombie Chair of the CEG at WPD Avonbank Feeder Road Bristol BS2 0TB Our Ref Your Ref Extension Date CEG1 16 March 2021

2. As regard to what impact will a stakeholder see by the end of RIIO-ED2 based on our Business Plan. This is a fair question and one that we can only partially answer at this stage as the plan is still in development. At a high level, we aim to ensure that our stakeholders receive excellent customer service as we develop and operate an ever-more smart and flexible network including investing wisely in those things that enable more rapid progress towards net zero - all whilst maintaining the bill at, or around, current levels. When we submit our Business Plan to the CG in July we will be in a position to demonstrate the measurable differences for stakeholders by the end of RIIO-ED2 and to highlight our ambition to ensure that our stakeholders receive an exceptional offering from WPD.

3. I note your views regarding our commitments. We have undertaken workshops with our stakeholders to discuss our strategies in key areas including; customer vulnerability, connections, digitalisation, smart and flexible networks, innovation and environmental sustainability. At these workshops our stakeholders are clearly telling us what they want from us and in many cases challenging us to go further. Overall where there is stakeholder support for more radical and ambitious changes we will embrace this and factor these into our plan. I think that this allows for more ‘co-creation’ than a plan where WPD sets it all out based solely on its view of ambition.

4. We absolutely recognise the need for justification of the proposed volumes of activity, along with demonstration of the efficiency of our costs, in our RIIOED2 plan. We have previously presented to the CEG sub-group our work to date on testing the efficiency of our costs, along with our plans for ongoing work ahead of the July submission. Building our plan bottom up provides the transparency to test all elements of our plan and demonstrate value for money. WPD has always looked to present this in the most meaningful way to our stakeholders and hence we previously presented the subgroup with our proposals on how we will present the bill impact of the various policy and finance decisions to our stakeholders. We welcome the feedback for the CEG sub-group on this as we continue to refine our work ahead of submission to the Challenge Group.

Thank you for your positive comments on access to the business and the positive engagement with my teams. I recognise the important role that the CEG has in assisting us to enhance our plan for RIIO-ED2 and feel that the only way we can truly achieve the best possible plan for WPD will be for my teams to be transparent and react positively to the challenges you pose.

Thank you for your observations and I look forward to continuing the dialogue and indeed the challenge to us!

Yours sincerely,

Phil Swift
Chief Executive
 

Click here to download a copy of this letter as a PDF

Who we are, what we do and how to contact us

The Customer Engagement Group (CEG) provides independent scrutiny of, and challenge to, NGED's business planning and decision-making process for RIIO-ED2, reflecting the needs and preferences of existing and future consumers and promoting good value customer outcomes.  We focus on affordability and the protection of consumers in vulnerable circumstances, the environment, sustainability and the transition to a low carbon energy system.

For more information and to meet our members, please click here.

To contact us click here.

How to contact National Grid Electricity Distribution (NGED)

To view their business plan or to engage with NGED regarding their ED2 business plan, please click here.