Setting the scene
A different world: Our vision for the future
A different world: Our vision for the future
Phil Jones, Chief Executive
I am privileged to lead a team that will not settle for anything other than being the best we can be for our customers.
Although a lot is yet to be revealed, we have a clear view of the long term destination and direction of travel. We are excited about the challenge that lies ahead for our business and the opportunity that we have to make a difference to our region in enabling the transition to a carbon-free society.
As we think about our plans, our touchstone is that…
We see the future as our opportunity to power our region with sustainable, long-term investments that unleash the potential of innovation, digitalisation, our people and collaboration to:
- Lead the drive towards decarbonisation
- Operate a highly reliable and resilient network
- Delight our customers with outstanding service
- Provide remarkable value for money
- Ensure world-class levels of safety and security
- Be a force for good throughout our region and beyond
A relentless focus on delivery in the here and now
Setting bold ambitions for the future is only the first step – important as it is. Being able to deliver them is even more important. Our strong performance in the current regulatory period gives us great momentum to deliver even more in the years ahead. We made 53 stretching commitments in our 2015–23 business plan and by 2023 we expect to deliver on them in full, and more:
- The number of power cuts will be down by over a quarter and will be 30% shorter
- Customer satisfaction levels will have increased to over 90%
- The time it takes to get connected will be shorter by 30%
And we will have done all that whilst finding cost efficiencies worth over £250m that have enabled us keep the average bill 5% lower in this period than it was in the previous one, meeting the tough spending targets set by our regulator at the same time as delivering more than was required.
We hope the significant improvements we have made over the last five years give you the confidence that we will deliver on our future promises, providing you with outstanding value for money.
A plan shaped by your priorities
Our aims and aspirations for the future have been shaped by the key messages we have heard from you in our engagement so far. I’m pleased to say that we share the same priorities. Finding the most efficient and effective route to that goal, and then attracting and delivering the investment needed to make it happen, is the challenge we all face.
To read more about the exciting and important choices and challenges click here.
The shape of our plan
Building a business plan that responds to your choices
Our overall vision drives us forward and will steer the plans we make for the future. But the detail of our business plan and the priorities we set across the six aspects of our vision will depend on the choices we make with you.
To explore these choices with you, we’ve broken our business into 12 performance areas, which is the way we are building our plan to present to you next year. The reality is that those different elements all interact with each other – some more than others. But it helps to be able to focus on a given area –before we bring them all back together to make sure the whole thing works.
For each area we have described five different levels of service. Since we know that cost and bill impacts will be a key driver for decisions and trade-offs, we provide you with a view of indicative costs in each case.
- In the first level of service (A) we would focus on cost reduction rather than service improvements
- In the second (B) costs would remain in line with inflation relative to the present levels – and we would invest any efficiency savings to continuously improve the service we deliver.
- Beyond that we describe higher levels of service (C–E) that would all push service levels markedly beyond what you see today. Generally, these levels of service would cost more.
- Level C involves stretching the current performance levels – it is the same kind of service, but at a significantly improved level of performance.
- The next two levels (D and E) involve a more radical change in the nature of the service you receive compared with today, most likely involving the introduction of something new that isn’t part of the experience we deliver at the moment.
By setting out these different levels our aim is to show you what we think could be possible – and, importantly, give an indication of what it might cost. The idea is that you explore different combinations and see what feels right for you in terms of balancing the priorities. None of these levels are set in stone, we expect that some people would want to take features from across the different levels that we present. If that’s the case, please provide us with that feedback.
A strong track record
Our track record of delivery so far in the current price control period (2015 to 2023) is strong and we are on track to deliver our 53 business plan commitments. In many cases, we expect to significantly exceed our targets despite tough cost allowances set by our regulator, Ofgem. In doing so, we will deliver on our overarching promise for this price period: to give you ‘more for less’.
For example, we have delivered significant network reliability improvements since 2015. There are now 28%1 fewer power cuts. When power cuts do happen, they are 31%1 shorter. These improvements have been delivered by making targeted investments, including investing in innovative technology such as network automation and remote control switches.
We have also made step-change improvements in the protection of our network to external threats. Since 2015, we have invested £31.1m in our flood defence programmes. A total of 212 sites will have been protected with flood defences by the end of the current price control period.
Cyber threats were not considered to be a significant risk when we made our RIIO-ED1 business plan, but as the threat has grown, we have found cost savings elsewhere in the business that have enabled us to invest £25.6m in new cyber defences.
Customer service improvement has also been a key priority. We have made investments in new technology and ‘customer-first’ training for all front-line and contact centre teams. We now provide more tailored services for vulnerable customers and we have increased the range of support we offer. Since 2015, customer satisfaction with our connections service has increased by 9.7 percentage points.
We hope our strong track record in ED1 gives you confidence in our capacity to deliver more for you in the future. To read more about our delivery in ED1, click here.
1 Unplanned, excluding exceptional events - reduction relative to business plan baseline, 2012/13
Explaining our costs
The cost of our business plan will be informed by your priorities and choices
We are in the process of gathering valuable stakeholder feedback about your needs and priorities for future services. We will use this to develop a well-justified and efficient business plan for RIIO-ED2 that represents good value for money for you.
To help you weigh up the key choices, it is important that we explain to you what we spend your money on – to read more about our costs, click here.
Keeping bills low by driving efficiencies in our business
Keeping bills low for our customers and providing value for money means constantly challenging ourselves to be more efficient in how we deliver our services.
In our RIIO-ED1 business plan, we committed to deliver ‘more for less’ and we are on-track to do that – delivering substantially improved outputs for lower like-for-like costs and living within the challenging cost allowances that were set by our regulator.
To deliver additional savings, we have well-developed, on-going cost efficiency programmes across our business covering our all aspects of our cost base – to read more about our efficiencies, click here.
A range of customers pay us for the service we provide
Most customers pay for the services provided by the electricity distribution network as part of the electricity bill that they get from their electricity supplier. Our charges represent approximately 15% of the total bill.
Most of our customers fall into one of three broad categories:
- 3.9 million domestic customers e.g. homes across our region;
- Approximately 250,000 commercial customers e.g. shops, bars, restaurants and other small and medium sized- businesses; or
- Approximately 30,000 industrial customers e.g. large factories.
Approximately 45% of our charges are paid by domestic customers who consume 35% of the electricity we distribute. On average a domestic customer uses approximately 2,900KWh of electricity every year and our charges are approximately £851 per year.
Approximately 40% of our charges are paid by industrial customers who consume 50% of the electricity we distribute and 15% by other customers who consume 15% of the electricity we distribute.
Customers pay for some of our costs immediately but a large portion will be paid for over a 45-year period
Not all of our costs are paid immediately by customers. About 70% of what we spend relates to investment in equipment that will last for several decades. These costs are recovered in your bills over a long period, currently 45 years (determined by ‘asset lives’). The other 30% is paid immediately.
What else does the customer bill include?
A customer bill also comprises tax, a return for investors (who are funding the 70% of cost that is not recovered for 45 years) and the impact of various incentive or uncertainty mechanisms determined by Ofgem.
Incentive mechanisms are put in place by Ofgem to reward better performance and penalise poorer performance on certain key regulatory measures. To read more about customer bills, click here.
1 Average domestic customer bill