Monthly Archives: November 2016

Public engagement in energy and water – more than window dressing

Most people would agree that public engagement in the energy and water sectors is generally a ‘good thing.’  However, like motherhood and apple pie, there can often be quite different ideas of what ‘good’ looks like.  Sharon Darcy summarises the latest New-Pin discussion paper on Consumer, citizen and stakeholder engagement and capacity building which explores whether the long-term public interest is being sufficiently represented through current approaches to engagement in the sectors.

Engagement in energy and water has been primarily driven by the drive to address market failures and develop more customer-centric services. There has also been a desire to give consumers a greater voice in how decisions are made, helping to improve the quality and comprehensiveness of decision-making, reduce regulator involvement, and increase the legitimacy of the process (potentially to the extent of having consumer or stakeholder representatives on boards).

There has been a growing interest in how engagement can also lead to culture change in companies.  Helping them in the move from being commodity to service providers that actively engage and collaborate with their customers is important in an era where in both sectors expectations on the demand side are increasing.

There is no single best approach to engaging consumer and citizen representatives in long-term decision-making.  However, greater clarity is needed about who owns the decision to engage, what the purpose of the exercise is and what the ‘red-lines’ of decision-making are.  Without clear objectives, it can be difficult for the public to understand why they should take part and for decision makers to measure the impact of the activity.

Company-led engagement undoubtedly brings many benefits.  Companies are best placed to feed the rich insight from engagement into their business plans.  Having a ‘golden thread’ that links engagement activity at the operational and strategic levels is vital.  However, given the significant social and environmental externalities in both energy and water – and the associated distributional and systemic impacts – a wider perspective which includes government- and regulatory-led engagement may also be needed for long-term issues.

There are some important gaps in how the public can engage on long-term issues.  Engagement needs to be appropriately ‘framed.’  Individual companies may not always be best placed to do this, particularly if the sector is going through a transition such as the move to low carbon.  Engagement also needs to cover what matters to stakeholders including ‘big-ticket’ issues: rates of return / cost of capital and strategic investments in the development of our energy and water systems.

A coherent view of engagement is needed to look across the disaggregated value chain in energy; and at the wider environmental context in water, where five-year price review plans need to dovetail in with longer-term Water Resource Management Plans.  To take account of the needs of future users, it will help to look at how behaviours and interests are evolving, particularly around local, community and regional interests – and how digital communications are leading to changed expectations in how we engage as citizens.

Consensus at all times is not achievable: there can be differing interests both within and between generations. Engaging consumer and citizen representatives on the ethical values applied in arriving at judgements about what is ‘fair – both between and within generations – and articulating these will be helpful on contentious issues.

Companies, regulators and policy-makers each need to set out their vision and expectation for stakeholder engagement on long-term issues.   Judging and assessing the impact of engagement can also be improved.  Challenge logs, a ‘you said: we did’ approach and independent accreditation of the process can all help.  Engagement will rarely negate the need for regulation. However, it can inform the need for regulation to re-assess and to re-focus.

Public interest advocates need resources. Without dedicated funding, and checks and balances in governance arrangements around this, engagement on long-run issues could be set up to fail or be unduly influenced by vested interests.

New-Pin has produced two engagement tools.  Firstly, a ‘Decision-making Framework’ to help all actors work out the best approach for them on engagement on long-term issues. This builds on the UK Regulators Network principles for effective engagement and includes: clear objectives; inclusivity; tailoring to the circumstances; transparency; and a developing, iterative approach. Secondly, to help build capability amongst consumer and citizen groups, we commissioned BritainThinks and London Economics to produce a Research approaches overview’ paper to guide public interest advocates in their discussions with both water and energy companies on the pros and cons of different research techniques.

We hope that these tools help ensure that engagement moves away from being a compliance activity or ‘just window dressing’ to being fully valued – and appropriately resourced – on all sides.

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