This month UK Power Networks finds out from the electricity regulator whether its £6.6bn price tag for the next control period is on the money or if there is more work to do before the final determination in November. The man who will be charged with delivering much of the major capital budget in UKPN’s three regions of London, Eastern and South Eastern is Nirmal Kotecha, the Director of capital programme and procurement. Interview by Jackie Whitelaw.

What will be different about the next control period which starts in April?

The regime is changing dramatically. To start with the control period will last eight years – well four years plus four subject to an interim review. That is something all the regulated industries have been asking for a long time because it lets businesses take a longer term view and allows us to provide visibility of workload to our supply chain which should lead to innovations and efficiencies.

Is the regulator encouraging innovation?

The new RIIO Regulatory Framework – (Revenue = Innovation + Incentives + Outputs) puts innovation at the heart of what we will be expected to do. The regulator is linking our future revenue to the delivery of key outputs and is encouraging innovation through incentives. Those key outputs encompass network reliability, customer service, our connections portfolio, health and safety, quality and environment including the low carbon agenda. We have committed to delivering 77 key outputs and have put a price tag on that of £6.6bn.

What is the challenge included in that?

We have committed to being the lowest cost DNO for our customers in the next period and to have the most reliable network. That means delivering more efficient solutions and in less time so we minimise outages for our customers. Linked to that there is a great deal of work to do on the low carbon agenda with significant growth in distributed generation that has been encouraged via the Government’s Feed In Tariff programme. There are wind and solar farm developers in the Eastern and South Eastern Regions who want to connect into our grid, but that grid is not designed for two way delivery. The network is set up to deliver power to our eight million customers, and now needs to be adapted to take in export electricity from new sources of generation.

Where does the incentive and innovation come in?

In the current DCPR5 regulatory period UK Power Networks has secured £51.45M, more than any other DNO, of Ofgem’s £500M Low Carbon Networks Fund, through a competitive bidding process. The process is designed to incentivise the industry to invest in projects that help the sector adapt to the low carbon economy.  During the next Regulatory Period RIIO-ED1, our Future Networks team, who are responsible for managing our network innovation projects, will continue to develop our project portfolio in line with Ofgem’s Network Innovation Stimulus. 

Presumably the supply chain is going to have to be part of the new thinking?

We spend £900M a year with our supply chain and because of the degree of dependency on it my challenge is to get it aligned to the UKPN agenda. It’s not just about price but customer service, safety etc; everything we have committed to deliver to the regulator. We all need to understand that the plan is the plan and that there is no more money. We all have to drive innovation, work smarter, do it differently. If we just adopt conventional models, we’ll be caught out.

Are there any obvious quick wins?

In my view the general construction industry has been slow in tackling waste and driving that out is going to be key. The question to the supply chain is have they been as innovative as they could be and will they work with us to get innovation on track? On a positive front, there is more momentum towards offsite manufacture and such factory-type thinking has to be in the future toolkit. We want to deal with organisations that can help deliver our business plan, whether they are small or large. The reality is that current costs are greater than we will be allowed by the regulator for the next period and therefore we have to drive innovation in the way in which we procure and deliver programmes in future.

What about BIM?

BIM is a suite of opportunities available to us. It works really well for major built assets but the case for linear infrastructure is less conclusive. That said it clearly has a role to play in terms of how it feeds into asset management. That is going to be the key for us. BIM on its own is not a competitive option.

What is the big risk ahead?

“Resources.  We employ over 5000 technically skilled staff including Tier One contractors. But over the next control period 2015 -2023 we expect 19% of our workforce to retire, rising to 27% in the subsequent period. We have a comprehensive workforce plan in place including trainee & market place recruitment, backfilling, up skilling and using contractors. From a recruitment perspective we plan to recruit over 1000 technicians, apprentices and engineering graduates over the course of the next control period.”

More on the UKPN business plan can be found here