Our Second Open Letter to Western Power Distribution’s Chief Executive
From Western Power Distribution’s Customer Engagement Group
Western Power Distribution
24 May 2021
I write this open letter as chair of the independent Customer Engagement Group (CEG) to give you the CEG’s view on the progress to date of Western Power Distribution in preparing its business plan for submission to Ofgem later this year and the main remaining issues we hope to see clarified.
Since I wrote to you in February, you have had further feedback from consultations on your second published draft plan business plan. We have seen you have several more ambitious targets and clarification of some commitments following feedback to your draft plans and demonstrated the impact of further engagement in your second draft plan. We also appreciate each draft plan published is adding to the extent of stakeholder input that we trust will underpin your final plan.
We are acutely aware this Draft Business Plan is still ‘work in progress’ and as you refine it further, the CEG hopes to see several important clarifications included when you publish in July 2021. These include:
- Clear justification for the targets and commitments in the plan. Targets in the two drafts of your business plan were tested on stakeholders, and further refined on the feedback received. We will be scrutinising your plan to evidence how you have demonstrated clear justification for the level of these targets, and the options considered, from the combination of feedback and your knowledge and experience as custodians of the distribution network. What cost/benefit and comparative analysis lies behind the targets and evidence the plan provides good value customer outcomes and longer-term impacts?
- High levels of acceptability of the plan amongst your consumers. You have continued to use extensive research to influence your plan and you have refined it based on feedback from stakeholders and customers though a range of engagement routes. We hope you would agree with us, high levels of acceptability by your paying customers for your proposals will add to the credibility of your business plan, and that will require them to clearly understand the impact on them.
- Clarity on bill levels and efficiency targets underpinning the plan. So far, WPD has suggested its bills will be “broadly flat” compared to current levels, while increasing investment above current levels. We would expect clarity on bill profiles, including the likely impact of inflation and any likely change due to regulatory mechanisms dealing with uncertainty, for example, related to different levels of progress (including none or barriers to progress) towards “net zero” by consumers and stakeholders in your area.
We will be looking in more detail at your customer value propositions and whole systems approaches as these develop. In July we would also like to see clear efficiency levels within the plan to minimise bill impact on customers, while still meeting their expectations your draft plans have set as you consider embedding innovation, technology and an open approach to the delivery of your plan from April 2023 onwards.
Again, I thank you and your team for engaging so well with the CEG and for responding to our challenges to date. We remain committed to working with you and playing our part in seeking to ensure your plan fulfils the requirements of your consumers and broader stakeholders.
Chair of the Customer Engagement Group at Western Power Distribution
Phil Swift's Response
Mr D McCombie
Chair of the CEG at WPD
12 July 2021
I would like to thank you for your letter dated 24th May 2021 which I said I would respond to after the publication of our first submission Business Plan.
Following extensive engagement with over 19,000 stakeholders and the publication for consultation of two draft Business Plans, we published our first submission Business Plan on 1st July. Our plan includes the main document of 200 pages, an overview document, a Board assurance statement, a navigating our plan document, eleven annexes, 202 engineering justification papers, 21 cost benefit analyses, eight consumer value propositions justification papers and a full set of regulatory documents. It is in near final form, however it will be still be subject to further consultation, customer acceptability testing and refinement prior to the final submission in December this year.
Our plan demonstrates our capability to connect up to 1.5 million electric vehicle charging points and 600,000 heat pumps between 2023 and 2028 as part of the smart future. We will also work with partner organisations to ensure no-one is left behind in the take up of low carbon technology and that 113,000 fuel poor customers are supported to save more than £60 million on their bills. We will also reduce our own business carbon footprint to be net zero by 2028 (excluding network losses), support stakeholders within our area to deliver their net zero ambitions and enhance our cyber resilience. All of this will be done while keeping the average domestic customer bill broadly flat around the current level of £98 per year.
In your letter you wanted to seek further clarifications in several areas. I will address each one of these in turn and indicate where the justifications can be found in our plan.
1. Clear justifications for the targets and commitments in the plan.
In our plan we have developed 45 core commitments and 162 wider commitments which have been co-created with our stakeholders and are supported by them. Our extensive engagement programme started in 2018, has involved over 250 engagement events with over 19,000 stakeholders participating in them. We started with 67 core commitments when we published our first draft Business Plan in January 2021 for consultation and as a result of feedback from our stakeholders at that stage and the subsequent second draft Business Plan consultation we now propose 45 core commitments which are more specific and measurable.
The details on how these commitments were developed and checked with stakeholders is fully described in detail in Our Business Plan 2023-2028 First Submission Chapter 3 and Supplementary Annex SA-03 – Giving customers a stronger voice. Also full details of stakeholder support for each of our core commitments is detailed in Our Business Plan 2023-2028 First Submission Chapter 4 and Supplementary Annex SA-04: Our Commitments.
2. High levels of acceptability of the plan amongst our customers.
We have conducted a best practice review of approaches to acceptability testing, and have applied the learnings to deliver an extremely comprehensive and robust research exercise with 2,721 current and future end user customers. With five months of consultation and further Business Plan refinement to come, our plan has received 82% acceptability.
This is, however, the most conservative view and considers only those customer explicitly expressing acceptance. If we were to apply the approach to reporting used widely within the water, gas and transmission sectors, we can highlight that only 3% of customer stated that they did not consider WPD’s Business Plan to be acceptable.
Amongst our stakeholders, our core commitments have received very high acceptability ranging from 87% (for consumer vulnerability) to 97% (for connections; workforce resilience; a smart and flexible network; community energy). Full details of our acceptability research can be found in Supplementary Annex- 03: Giving customers a stronger voice: Enhanced engagement.
3. Clarity on bill level and efficiency targets underpinning the plan.
Our plan clearly demonstrates that the investment required to allow us and our stakeholders to meet net zero and the need to enhance cyber security means we propose to spend £188 million more per year between 2023 and 2028 than we are currently spending. However due to efficiencies and financing parameters we will keep our portion of the bill for an average domestic customer broadly flat around the current level of £98 per year.
Our Business Plan 2023-2028 First Submission Chapter 6 Page 160 and Chapter 9 Page 190 provides the transparent detail of the way the bill is made up and what it is forecast to be in RIIO-ED2.
Thank you for requesting these clarifications which I trust have been addressed. My team and I look forward to working with you over the next few months in order to further refine the Business Plan ready for final submission on 1st December 2021.
Who we are, what we do and how to contact us
The Customer Engagement Group (CEG) provides independent scrutiny of, and challenge to, WPD’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.
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How to contact Western Power Distribution (WPD)
To view their business plan or to engage with WPD regarding their ED2 business plan, please click here.