What are the Key Challenges for London’s Utility Industries?

London First has recently submitted evidence to the National Infrastructure Commission’s (NIC’s) call for evidence on the future of regulation in the energy, water and digital industries. Here are the five key takeaways from our submission:

1. Regulatory regimes need to account for specific needs 

Not all cities and regions are the same and recognising that will benefit the whole of the UK. London is the UK’s fastest growing region, which means there is greater demand from businesses and residents in the capital. And regulation needs to keep up. 

The capital also faces a variety of other challenges, including:

• London facing the greatest projected increases in drought and flooding risk. 
• The electricity distribution network operated by UK Power Networks having the greatest demand from electric vehicles in the UK.
• The expense of maintaining an ageing and over-crowded network of pipes, ducts and utilities below London’s streets.
• Specific planning-relating challenges for the rollout of digital infrastructure. 

2. Utilities are suffering from political and regulatory risk

The UK has a global reputation for reliable and stable regulatory systems – but re-nationalisation is on the Labour Party’s agenda and there is political pressure on regulators to lower bills.

Earlier this month London First warned against nationalisation in a piece for City AM – as well as the broader risks to the environment for investors in London. The article also highlighted that 7.67m UK pension pots stand to lose out from Labour’s plans to re-nationalise industries below market value. You can find more details on the Global Infrastructure Investor Association’s website.

3. Regulation needs to promote more future-proofing

Consumers need to be confident that there is relentless efficiency pressure on utilities to strip out unnecessary costs. But if this comes at the expense of long-term investment in utilities, it could erode the resilience of water and energy networks. This could restrict London’s ability to be a pioneering city for innovations such as electric cars and lead to knock-on consequences in areas such as housing delivery. For instance, failure to invest ahead of need in utilities infrastructure at the Vauxhall Nine Elms Battersea site led to costly retrofitting of electricity and drainage infrastructure.

It could also be costly for consumers. The NIC estimates that emergency measures relating to water shortages would be around twice as expensive compared to building resilience. This highlights the importance of treating positively the case for new infrastructure (such as the proposed reservoir at Abingdon) as well as appropriate incentives to reduce demand. Moreover, it supports the case for Thames Water’s recently submitted business plan, which will plough billions of pounds into improving the resilience of water infrastructure while cutting prices. 

4. Planning barriers to digital infrastructure deployment are a particular issue for London

There are several barriers to digital deployment across the UK. Issues include problems associated with negotiating wayleaves for access to land and obtaining permission from local authorities to conduct street works. These are particular problems in the capital, making London an expensive place to roll out digital infrastructure. By way of example, BT Openreach claim that in the City of London alone, they have been unable to connect 7,500 tenants to ultrafast broadband due to a failure to agree a wayleave with landlords. 

5. London First will…

…continue making the case for long term investment in London’s infrastructure, working with developers, infrastructure operators, the GLA, regulators and the NIC. This includes establishing a new Working Group to promote a shared vision for businesses and local authorities on the opportunities from world-class digital infrastructure. We look forward to discussing these issues, among others, at The London Infrastructure Summit in September.