ANDREW SMITH PUBLISHES RESULTS OF AN INDEPENDENT EFFICIENCY REVIEW OF UTILITY REGULATORS

The results of an independent review into the efficiency of the Utility Regulators, Ofgem (electricity and gas), Oftel (telecommunications), Ofwat (water and sewerage), and ORR (rail), were published by the Chief Secretary, Andrew Smith today.

Welcoming the report, Andrew Smith commented:

“I am very grateful to WS Atkins for their thorough report, and the positive way in which the regulators have approached this review. The purpose of this work was to give the Government, the regulators themselves and their stakeholders the reassurance that each organisation was efficiently run, to identify any shortcomings and encourage the spread of best practice. It was not the intention to question the policies being followed by the regulators.

“The Treasury and the four Regulators will now be looking at the report’s recommendations and considering how to take them forward, bearing in mind that some of the recommendations will apply to some of the Regulators but not all.”

The report concluded that the regulators are professionally run organisations and that there are many examples of good practice. Whilst the costs of regulation have risen well in excess of inflation, the amounts involved are still very small in comparison to the turnover of the regulated industries and the benefits received by consumers. But the report also identified areas for improvement. Four of the main findings of the report are:

More could be done to ensure that good practice in one organisation is shared by the others.
Focus needs to be given to controlling further the proportion of costs spent on support services.
The annual staff turnover of 20% (a lot higher in some specialist grades) needs to be addressed, particularly in Oftel and Ofgem. Market-related pay structures for senior and middle-ranking staff should be considered.
More could be done to increase transparency in budget-setting and assessing the costs and benefits of individual projects at an early stage.

NOTES FOR EDITORS

This efficiency review commenced in August. It is based on some 50 interviews with senior staff at the four regulators, copious written material, case studies of specific projects, a questionnaire answered by some 80 stakeholders, detailed interviews with representatives of major regulated businesses, and comparisons with similar public sector bodies in the UK and overseas.

A full copy of the report is available on the Treasury website.