Frontier (Europe) tonight hosted an event to discuss the precedent created by the regulated network appeals recently concluded by the Competition and Markets Authority (CMA). The event, chaired by Phil Burns (Director at Frontier Economics) included contributions from four panel members:

• John France (Regulation Director at Northern Powergrid)
• Tim Tutton (CMA Panel Member and Bristol Water Non-Executive Director)
• Mike Huggins (Director at Frontier Economics)
• Rob Francis (Associate Director at Frontier Economics)

Over the course of 2015, the CMA has heard three different types of regulatory appeal.  In the water and sewerage sector, where appeal processes remain broad, Bristol Water’s rejection of Ofwat’s Final Proposals triggered a full redetermination by CMA.  The energy networks are now served by a focused appeal regime, under which appellants must demonstrate that a particular regulatory decision is wrong on specific grounds in order to be successful.  The regime in energy also now gives rights of appeal to third parties.  Both Northern Powergrid (an electricity distribution network operator) and British Gas Trading (an affected retailer) chose to exercise their appeal rights in respect of Ofgem’s RIIO-ED1 decision.

These three appeal cases will have wider significance beyond their own particular details.  The discussion event assessed what we can learn about how the form of the appeal process influences the behaviour both of regulators and regulated companies.  For example, what are the implications for the level of evidence required to support each regulatory decision?  Is the symmetry implied by the ability of third parties to bring their own appeals an effective way to protect customer interests?  Overall, what features of the appeal procedure (whether broad or focused) support regulation that is in the best long-term interests of customers and investors? The answers to these questions may cause regulators to change how they go about their work in future, which may in turn require changes in regulatory strategy for the companies they regulate. Our speakers and attendees were invited to consider and debate these questions and the future of network regulation.

Frontier (Europe) regularly advises private and public sector clients across a number of sectors on a range of regulatory issues.

For more information, please contact Goran Serdarevic on g.serdarevic@frontier-economics.com, or call +44 (0)20 7031 7000.