Utility Week: Penrose review not likely to gather dust

The publication this week of John Penrose‘s review into the effectiveness of UK regulation could be dismissed as simply another Whitehall shelf-filler. However, David Blackman argues that Penrose’s proximity to the centre of power mean his views are more likely than most to be acted upon. So, what could this mean for utilities?

The Penrose-Harding household must be a pretty high-octane environment. For much of the past year, Baroness Harding has been overseeing the establishment and faltering progress of the UK’s coronavirus track and trace regime. Meanwhile, since September, her husband John Penrose MP has been keeping busy on a new blueprint for UK regulation.

The fruit of the West Country Conservative MP’s labours emerged this week. Whitehall’s bookshelves groan under the physical and virtual weight of long-forgotten reviews. For the likes of Yes Minister’s Sir Humphrey Appleby and his political masters, commissioning a review was a handy way of putting off taking action. By the time the review has been completed, the issue that prompted it may have blown over or the minister who commissioned it moved on.

An example was professor Dieter Helm’s review of energy policy. The bulk of the document’s no fewer than 67 recommendations appear to have been largely forgotten by the Business, Energy and Industrial Strategy department, which commissioned it in 2017.

However, Penrose will be more difficult to ignore. In contrast to the academic prof Helm, the Somerset MP has not been afraid to rock the boat since he was elected to parliament in 2005. He led the campaign from the Conservative backbenches against what he branded rip-off standard variable tariffs, which presaged the energy price cap.

Like Helm, Penrose had a strong idea about the answer to the question he was set before his review commenced. At a fringe meeting at the Conservative party conference in late 2018, he called for the scrapping of existing sector-specific regulators like Ofgem and Ofwat. These economic regulators should be replaced with a single watchdog to oversee all utility network functions, he told delegates.

This initial vision has been watered down in his report, which proposes that individual regulators shouldn’t be abolished. Over time, though, as greater competition is injected into the markets they police, the report says regulators should surrender functions to the Competition and Markets Authority until their remit is confined to the oversight of surviving monopolies and “deeply embedded long-term consumer protection problems”.

Penrose’s vision is less radical than those who prize the UK’s existing framework of independent utilities regulation may have feared. However, given his track record and close links to the heart of government, it would be rash to bet against it being implemented.