Customer Engagement Group – progress report October 2019https://www.sgnfuture.co.uk/wp-content/themes/fildisi/images/empty/thumbnail.jpg150150SGN FutureSGN Futurehttps://www.sgnfuture.co.uk/wp-content/themes/fildisi/images/empty/thumbnail.jpg
The SGN Consumer Engagement Group has now had a chance to consider the second version of SGN’s Business Plan which they provided at the start of October.
We’ve been really impressed with the amount of consumer and stakeholder engagement that SGN has managed to do in a very short period over the summer. Moreover this engagement has really shaped certain aspects of the plan – such as the support to be provided to vulnerable customers.
Inevitably there are elements of the plan where we think SGN still needs to do more work before it submits its final plan in December.
Probably the biggest area is on the environment and de-carbonisation which we know is of growing concern to consumers and in particular future consumers (as represented by the young people that SGN has included in its research). We recognise that SGN is doing a lot to build understanding around the potential of hydrogen but want to see more focus on reducing emissions in GD2. That means looking at what more can be done on leakage, biomethane injection and SGN’s own business carbon footprint. There are some good initiatives in the plan but we want to see what this all adds up to in terms of the impact on emissions and will then challenge SGN to ensure that they’re doing all they can in these areas.
Aside from the environment, other areas we’re continuing to press SGN on include things like their productivity assumptions (noting all the innovation projects that have been happening in GD1) and workforce diversity where we are encouraging them to talk to a wider set of stakeholders who might be able to help with this challenge.
Once we get the final plan from SGN in December we’ll have only a few weeks to get our final report to Ofgem. We’re therefore doing all we can now to prepare. It will be a busy two months for the group and I remain grateful for all the work they are putting in alongside their day jobs.
Customer Engagement Group – progress report July 2019https://www.sgnfuture.co.uk/wp-content/themes/fildisi/images/empty/thumbnail.jpg150150SGN FutureSGN Futurehttps://www.sgnfuture.co.uk/wp-content/themes/fildisi/images/empty/thumbnail.jpg
We’re aware that the Ofgem sector-specific decision on the framework for RIIO2 only came out a month before the plan had to be submitted. This decision included, for example, a much stronger emphasis on environmental issues – requiring a separate Environmental Action Plan. While this was welcome, and responded to feedback the CEG had given Ofgem, we recognised that SGN then had little time to update their plan to meet the new requirements
Our main message to the SGN Board has been to emphasise how much still needs to be done in a relatively short amount of time. I mentioned in my April report there was a huge amount to do but that is even more stark now we have seen the Ofgem decision and the first cut of the plan, which has to cover an awful lot of ground.
We’ve highlighted three key areas:
The need for more work on the environmental front. While SGN has a clear vision about how the network can be repurposed to carry hydrogen and are investing to provide the evidence to help policymakers, we have been saying for some time that we would like to see more being done to reduce carbon in the RIIO2 period through a stronger focus on biomethane injection and maintaining the progress made on leakage. Ofgem are now clear that this is something they are looking for too, alongside detailed plans to tackle SGN’s own carbon footprint and address wider environmental issues.
The need for more detail around some of the specific incentive mechanisms and outputs that SGN put forward in its plan. To include bespoke incentives, Ofgem has set a high bar in terms of the evidence and detail that companies will need to provide (and which we are expected to comment on). We have not yet seen that detail and SGN have work to do to bring that together and determine which outputs it expects to include in its final plan. SGN has identified a number of additional projects that it could undertake to improve safety and reliability. However, customers have said that while they value safety and reliability highly, they do not expect SGN to spend more on this aspect as they already perform well. SGN are experts in terms of understanding where investment is needed on safety or reliability grounds and we expect to see more evidence on the analysis they have done to justify any additional investment in this space.
We also want to see more in-depth exploration with customers around some of the difficult decisions that SGN is facing. We know SGN has a good sense of customer broad priorities but we have highlighted the danger in asking customers for their views on specific projects without giving them the detailed information they need to reach an informed view. Inevitably this sort of in-depth deliberative research can only involve a relatively small sample of customers, but we maintain that it’s vital in what is a complex area. While there can be a temptation to put more weight on what is seen as statistically significant results from a large survey of thousands of customers if customers don’t really understand what they are being asked those results can be meaningless. This is difficult stuff – and some members of the CEG who were involved in the water price controls have debated with passion the relative merits of getting informed versus uninformed customers’ views. We hope the opportunity to work through some of these tensions with an expert group of CEG members has helped SGN develop a much better programme of research to test its current plan.
Reflecting on this list and the range of other issues where we feel more work is needed (from handling of the SIUs to development of a people plan and more focus on large gas users) there is a significant mountain to be climbed. Moreover, the timings are critical – you can’t really get customer input until you have narrowed down the options a bit and put more flesh on the bones of some of the proposals. However, you need to get customer input while there is still time for that input to shape the plan.
SGN’s next deadline to provide a second draft of the plan is on 1 October. That’s less than two months away, with a huge amount still to do. However, we have seen really good progress through the first part of this year and we are happy they are heading in the right direction, with a strong emphasis on the customer. While no-one under-estimates the scale of the task ahead we are hopeful that they can get there.
Customer Engagement Group – progress report April 2019https://www.sgnfuture.co.uk/wp-content/themes/fildisi/images/empty/thumbnail.jpg150150SGN FutureSGN Futurehttps://www.sgnfuture.co.uk/wp-content/themes/fildisi/images/empty/thumbnail.jpg
Through this process, we’re beginning to see the various options the company is considering however, how these elements combine and work together in a cohesive way will only become clear in the next phase, when the overall business plan is pulled together.
We believe SGN has adopted a sensible bottom-up approach to its business plan development and we gain comfort in seeing the company’s experts fully engaged in the tasks in hand.
However, we’ve also made it clear to the Board we’d like to see a more top-down vision as well, with a clearer articulation of the sort of company SGN aspires to be. We’re hopeful to see this aspect come through as we continue our work.
Heat policy and investment decisions
Through working with the company, it’s clear one of the biggest challenges it faces is how to deal with the uncertainty surrounding the UK Government’s heat policy and in particular, its position on de-carbonisation.
Ofgem’s strategy document for the next price control proposes a ‘re-opening mechanism’ to cover any impact of future government policy change. However, we’re concerned how SGN can make decisions in the current price control period (which runs to 2021) not only ensuring gas continues to flow safely, but also ensuring the risk of having stranded assets is kept to a minimum.
We’ve also been talking to SGN about the trade-offs it’s making between the repair and the replacement of aging assets and what pay-back period it would expect for any investment. We hope this is something Ofgem will provide more clarity on in its sector decision.
Analysis of research
In parallel to our regular CEG meetings, members of our customer research sub-group have been getting their heads around SGN’s own customer research, including the methodologies being used.
Other CEG members (with specific interests) have participated in ‘deep dives’ into particular areas of customer research. Eg on younger, on future, on business and (coming-up soon) on vulnerable and hard-to-reach customers. This work has provided additional valuable insight as well as reassuring us customers are being listened to.
CEG members have also attended some of the company’s ‘moving forward together’ workshops, which involve a wide range of stakeholders. In addition, we’ve been to some of the company’s specific ‘future of gas’ events.
With so much research and engagement going on, we’ve asked for a matrix to be created, to show how different research feeds into different parts of the business plan and how confident the company is in the accuracy of its results.
For example, as a group we noted how customer and stakeholder views’ could differ, while issues around the future of gas could be quite hard for some customers to engage with. This means more reliance is placed on stakeholder input rather than customer. SGN is now working to populate this matrix, which we believe will be helpful to all parties.
As a group, we continue to reflect on the best ways of working. We now have significant segments of each meeting as ‘CEG only’ time, which allows us to work through in detail our position on issues and avoid any temptation for this to become a presentation-heavy process led by SGN.
We’ve also formed three sub-groups which focus on SGN’s three themes underpinning its business plan. These also broadly align with Ofgem’s three outcome areas.
While we feel to-date we’ve provided SGN with a lot of challenge and questions, our formal ‘challenge log’ remains relatively empty. This may be because we set the initial bar intentionally high, but we do expect more challenges to be added when we see the first draft of the company’s business plan.
We did provide SGN with an end of Phase 1 report, which provided some early steers plus a range of questions which we expected to have answered when first draft of the plan was unveiled. This report was the output of a ‘CEG only’ session held in December, which also demonstrated the value of having this separate time together.
While we’ve not logged many formal challenges to date, we’re clear we’re having a positive impact on the development of SGN’s business plan.
In response to specific CEG challenges, SGN has:
Carried out research with 50 major gas users
Started to engage with local authority sustainability teams, rather than just the housing teams
Started exploring how it’s ‘10 Year development plan statement’ required through industry codes, can provide the basis for network reinforcement decisions and be adapted to reflect the range of planning scenarios which are being discussed. Particularly given the uncertainty around heat de-carbonisation
Rescheduled its ‘willingness to pay’ research, reflecting our concerns it would be premature without a clear view of the options needed to be tested
Committed to carrying-out research to test what really matters to customers about unplanned gas interruptions. This was given our concerns over Ofgem’s proposal to require appointments being a costly solution, not actually delivering on what customers really want.
Because of the way we’re set up, with clear representation across both Scotland and the south of England, we’ve been able to ensure different regional perspectives are brought to bear in how SGN approach its plan.
While we haven’t seen major differences in customer views between the two regions, we’re very mindful of the Scottish Government’s focus in particular on vulnerability and its ambitions around climate change.
In recognising the importance of the Ofgem framework in whether SGN’s plan meets the needs and wishes of its customers, we decided to respond formally to Ofgem’s consultation on the sector methodology, highlighting the evidence we’d gained around what SGN’s customers and stakeholders think.
While we believe most other company CEGs and user groups are taking the regulator’s framework as read, we hope Ofgem will find our customer perspective helpful.
There’s now a considerable amount to be done over the remainder of the year. SGN has to submit to Ofgem drafts of its business plan in July and then again in October and this leads-up to its final submission in December 2019.
We’ll be providing SGN with our views on each of its drafts as they are created and sharing our initial reactions with Ofgem’s own appointed Customer Challenge Group, ahead of providing our final report at the end of this year.
Remember, you can also have your say on SGN’s plans by joining their customer panel, or by completing their online survey.