The Future of Regulation – NIC Consultation

United Kingdom

On 18 February 2019, the National Infrastructure Commission (the “NIC”) published a consultation titled “The Future of Regulation Study Call for Evidence” (the “Consultation”) by request of the Chancellor to assess what changes might be necessary to the existing regulatory framework to facilitate future investment needs in infrastructure. The focus of the Consultation is on economic regulation of the energy, telecoms and water industries. It seeks to ensure that the needs of both future and current consumers are met, whilst also establishing ways to promote competition and innovation. In this article, we draw out some of the key points from the Consultation and consider its situation within the wider industry dialogue.

The Consultation

The consultation questions are wide-ranging, and fall under four main headings:

  1. Future changes – these questions explore whether regulation in the past has been a success or failure in facilitating investment and innovation and meeting consumer needs within the relevant sectors and how regulation may need to evolve further in light of future challenges;
  2. Competition and innovation – stakeholders are asked to comment on the level of competition and innovation under existing regulations and give examples of where regulators may have been too slow to adapt, potentially stifling innovation and investment;
  3. Regulatory consistency – the NIC is seeking views on the case for greater consolidation of utilities regulation across sectors, whether in relation to specific functions or more generally; and
  4. Policy and regulationthese questions look at the relationship between government and regulators and ways to promote public trust in regulatory systems.

Commentary

The Consultation appears to be in line with the general regulatory approach of innovation. For example, in October 2018, the Government consulted on how best to encourage further innovation within regulated utilities. Incentivising innovation is also a central part of regulators’ approaches to price controls:

  • Innovation is a “key theme” of the 2019 Price Review in the water industry; and
  • Innovation incentives are being maintained in the RIIO-2 price controls framework for electricity and gas network operators who can provide cutting edge solutions.

Similarly, the Government’s Smart Systems & Flexibility Plan aims to put in place a regulatory framework for a smart and flexible system that will strengthen market incentives for innovation.

Next steps

The deadline for responses to the Consultation is 12 April 2019. The Consultation is open to responses from all interested parties.    

The Consultation is the latest development in a growing list of innovation-centred stakeholder engagement. It is an exciting time within the regulated sectors and there are plenty of opportunities for businesses both within and outside the regulated utilities to play a part in shaping the future of these sectors.