Energy regulator's plans to rein-in day-to-day spending could imperil net zero projects as well as training for already over-stretched workers, argues Sue Ferns of trade union Prospect
Last week, the energy regulator made its priorities crystal clear - for Ofgem, cutting costs is the only goal that really matters. The publication of Ofgem's latest plans for network regulation, the system that determines how much monopoly energy networks can charge customers, include unprecedented cuts to spending that threaten job losses and the drive to net zero. Instead of planning for the future, the regulator has become fixated on a race to the bottom on costs that will harm the interests of both consumers and workers.
The regulator has been stung by repeated complaints of failing to rein in corporate profits. Citizens Advice, the National Audit Office, and unions like Prospect have all been critical of a system of regulation that has repeatedly rewarded investors and senior executives at the expense of workers and consumers. The electricity network companies have all paid out far more over the last decade in dividends than they have spent in total on pay and pensions for staff.
Reining in excessive profits is a worthy goal, and Ofgem's decision to finally take action is welcome. But the regulator's proposed approach has proven to be nothing more than a crude cost-cutting exercise. There are two fundamental problems: a refusal to let companies proactively invest in new net zero projects, and deep cuts to day-to-day spending that threaten efforts to sustain a healthy, diverse, and skilled workforce.
To reach net zero, we know we need to spend billions on upgrading energy networks to support things like electric vehicles, low-carbon heating, and new renewables. But Ofgem has proposed a 'wait and see' approach, delaying any anticipatory investment for several years until evidence of need is clearer. Yet, without this foundational investment, progress will stall - new charging infrastructure is, for example, a crucial prerequisite to building consumer confidence in electric vehicles. Network companies have already been preparing for these kinds of projects and Ofgem's shock decision to delay them for years will place thousands of jobs at risk.
At the same time, Ofgem is proposing unsustainable cuts to spending on staff. This is despite mounting evidence that the workforce is already over-stretched and under tremendous pressure. According to Prospect research conducted last year, three quarters of staff in the energy networks would describe their typical daily workload as either heavy or extremely heavy, while one-in-three say they feel overwhelmed at work on a daily basis. There were widespread concerns about unsafe staffing levels and underinvestment in staff training and development. These concerns were echoed in a recent study by the Health and Safety Laboratory, which found that understaffing and excessive workload pressures risk undermining safety standards.
On top of this, energy networks face huge challenges to creating a skilled, diverse workforce fit for the future. An impending wave of retirements, competition for skills from other industries, and a chronic lack of diversity in the sector threaten the ability of network companies to find sufficient skilled workers to deliver net zero projects. The National Skills Academy estimates 35,000 vacancies will need to be filled in the electricity networks in the next decade - roughly half of these posts will be filled by upskilling existing workers, and most of the rest by recruiting new trainees. Spending on high quality technical training will therefore be critical.
In this context, Ofgem's decision to slash day-to-day expenditure is baffling and dangerous. The regulator's most recent proposals include cuts of up to 90 per cent to safety budgets, and 75 per cent cuts to spending on training. The regulator is proposing to allow National Grid to spend more on its CEO and senior managers than on health and safety and operational training combined. With strict new limits on investor returns, there is real risk spending could fall even further as companies raid staffing budgets to maintain shareholder pay-outs. This cannot be justified and places the wellbeing of staff in jeopardy while hamstringing efforts to recruit and train a skilled, diverse workforce.
Prospect and our partner unions have put forward concrete proposals to ring-fence spending on crucial areas like safety and technical training, and to push companies to turn rhetoric into action on diversity and inclusion. But Ofgem has repeatedly ignored us. The regulator must urgently change tack - if not, these deeply flawed proposals will threaten the resilience of our energy system and derail the drive to net zero.
Sue Ferns is senior deputy general secretary at the trade union Prospect, which represents engineers, managers, scientists and civil servants
