Regulatory flexibility policy paper

Overview

Almost half of the UK’s infrastructure, chiefly water and energy, is financed and delivered by the private sector, and paid for by consumers, under the Regulated Asset Base (RAB) model. This regulatory model has generated significant investment and improved performance over the past decades but is increasingly facing new demand drivers. These include achieving net-zero greenhouse gas emissions, adapting and becoming more resilient to climate change and extreme weather events, contributing to efforts to address the nation’s housing shortage, and rapid advances in technology that have the potential to transform infrastructure networks.

Given the increasingly complex and holistic long-term solutions which are necessary to tackle these challenges, the regulation of economic infrastructure needs to be more flexible and strategic in its nature. An emphasis also needs to be placed on the regulated utilities to improve processes. Crucially, it is vital for the government to outline a stable, long-term vision for the UK’s infrastructure networks to allow regulators, companies and their investors to better evaluate, drive and deliver strategic investments that address core challenges.

This talk summarises the four recommendations made in the ICE’s May 2020 policy paper “Aligning long-term government policy and the regulation of utility companies”.