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The RIIO-2 Framework consultation, competition and consumer saving

The RIIO-2 Framework  consultation, competition and consumer saving

With the Framework now set, in a series of blogs, Explain Market Research will explore what the changes mean to the sector. In this first blog we will review what strengthening the consumer voice means, and how to reach the end user.

 RIIO-T1 and RIIO-GD1 price controls are due to end in March 2021 with RIIO-ED1 ending in March 2023. Ofgem launched the framework review for RIIO-2 earlier this year which marked the beginning of the consultation process for setting price controls for the network companies running the gas and electricity transmission and distribution networks in the UK. Today, Ofgem have announced the results of the consultation, and the main changes as a result of the framework decision are:

  • Confirmation that the default length of the next controls from 2021 will be five years (compared with the current eight years)
  • Plans to deliver savings of over £5bn to consumers
  • No update to the 3%-5% cost of equity range (the amount the companies can pay their shareholders)
  • Extending the scope for opening up high value network upgrades to the benefits of competition across the gas and electricity sectors

 The consultation centred on and focussed on the following areas:

  • Strengthening the consumer voice
  • Responding to changes in how networks are used
  • Driving innovation and efficiency
  • Simplifying the price controls
  • Fair returns and financeability 

One of the core areas of focus in the framework decision and central to RIIO-2 is strengthening the consumer voice and ‘giving consumers a stronger voice in setting outputs and shaping and assessing business plans.’ In this article we will explore what strengthening the consumer voice really means and how this can be achieved throughout the business planning process.

Giving consumers a stronger voice

With confirmation from Ofgem that consumer engagement needs to be critical to successful business planning in RIIO-2, organisations now need to scope out the methods, tools and solutions to engage with customers and stakeholders.

Distribution companies will and are forming Customer Engagement Groups and transmission companies are establishing User Groups. In addition, Ofgem will create a central RIIO-2 Challenge Group for all sectors. Engagement with customers is vital in this round of business planning, and it is clear from the framework decision that the groups will supplement rather than substitute the wider customer engagement programme.

The water sector adapted through business planning periods PR14 and PR19 to ensure they captured customer and stakeholder views using Water Forums and Customer Challenge Groups. The aviation sector is well known for creating engagement channels through constructive engagement. Both are well established routes and there is shared learning that can be applied.

As an example of engagement, customer forums and constructive engagement frameworks reach segments of customer representatives and stakeholders, but neither approach captures the views of the end user.

Explain has worked within the utilities sector for two decades, working in contracted partnerships with several of the UK’s biggest and most respected suppliers and distributors. These relationships have allowed Explain to develop an in-depth understanding of the importance of customer and stakeholder engagement, ensuring we engage with the end user to deliver insights to support and reinforce business planning.

Why Explain:

  1. Business planning experience: With experience of Water Forums and Customer Challenge Groups in the water sector and complex customer and stakeholder engagement in the utility sector through RIIO-1, PR09, PR14, and most recently PR19 - we are adept at engaging with customer and challenger groups, alongside core customer research to deliver representative results
  2. Independent: You can be confident that our advice will be impartial, open and focused on delivering robust insight to support business planning throughout RIIO-2
  3. Bespoke solutions: Offering a range of research methodologies from the traditional to the innovative, always focussing on the best approach to deliver robust insights ensuring we engage with the end user   
  4. Research that unlocks insight: Delivering a range of research solutions through a mix of methodologies to deliver insights including: business planning strategic reviews, stakeholder research, customer research, vulnerable customer research, brand awareness and perceptions and public consultation.

On 4th October 2018, experts from the Explain team are presenting their findings from the Northumbrian Water Innovation Festival at the MRS Utilities Conference. The findings focus on the future of customer engagement in the utilities sector and innovation in the market research sector to future proof and provide solutions to engage with customers.

Contact the team for further information on the services we can provide.