Technical annex to Strategic Investment and Public ...€¦ · UK water & sewerage industry is...

Performance data for water, energy and telecoms

Technical annex to Strategic Investment and Public Confidence October 2019

Performance data for water, energy and telecoms

2

The National Infrastructure Commission used a wide variety of evidence inputs to the Strategic Investment and Public Confidence study. Performance data for the water, energy and telecoms sectors was a crucial part of the evidence base. This data helped the Commission understand how the sectors are performing across a range of industry and consumer outcomes, how these have changed over time, and how the UK system compares to other countries.

As explained in the section 2.4 of the main report, the Commission believes that transparent monitoring and assessment of sector performance by regulators is vital if they are to be effectively held to account by Parliament and the general public.

This technical annex uses a framework for performance data that the Commission have found helpful for understanding outcomes across the sectors and setting them in historical and international context. This framework is based on the Commission’s performance measures for infrastructure.

Data includes outcome measures such as volumes and capacity, efficiency, resilience, service quality, quality of user experience, environment, prices and bills. These measures are important for understanding whether the system is delivering on outcomes that matter for quality of life, competitiveness and economic growth.

In addition, the framework includes financial data such as capital expenditure (investment), operational expenditure and the cost of capital for companies operating in the three sectors. These are inputs, rather than outcomes that are experienced by consumers directly. Nevertheless, the legitimacy of these sectors depends on the public being able to see how the money that they pay through bills is being spent. As inputs, these are also likely to be useful leading indicators of future outcomes.

Where possible, the performance data has been presented as a time series. Institutional and technological changes may alter the desirable levels over time, and methodological changes to statistics can make exact comparisons difficult. Nevertheless, historical context is important to understand whether or not performance has improved.

The data is presented without commentary, which is covered in the main report. Explanatory footnotes are provided for information.

The Commission is grateful to stakeholders, particularly Ofwat, Ofgem, Ofcom, Office for National Statistics, Environment Agency, Consumer Council for Water, Drinking Water Inspectorate and London Economics, who helped identify much of this data. They are not responsible for the final product, including any errors that have arisen translating the data from their original sources to the charts presented here.

https://www.nic.org.uk/publications/technical-annex-measuring-infrastructure-performance/

Volume

4

Water – Energy – Telecoms – Cross-sector

80

90

100

110

120

130

140

150

160

170

180

Water and sewerage 1990=100 Whole economy 1990=100

Source: Commission calculations using ONS (2019) GDP(O) low level aggregates, Chained Volume Measure.SIC 2007 divisions 36 (Water collection, treatment and supply) and 37 (Sewerage)

Water and sewerage output (Gross Value Added) relative to whole economy1990=100

125

130

135

140

145

150

155

160

165

Ofwat: measured and unmeasured water per billed measured household

Consumer Council for Water: average water use per person

Discover Water: water usage per person

Volume

5

Source: water company data provided by Ofwat, Consumer Council for Water, Discover Water/Water UKNote: methodology changes may affect comparisons over time


Average daily water consumption per person, litres per day

Investment

6

Source: Commission calculations using water company data provided by Ofwat. Note: 2018/19 prices using GDP deflator

Source: Commission calculation using ONS (2019) Multi-factor productivity estimates: Experimental estimates to October to December 2018.Notes: 2018 prices using experimental implied GFCF deflator. In these historic estimates of Gross Fixed Capital Formation, waste is bundled with water supply and sewerage in the SIC 2007 classification Section E.


Water and sewerage investment (capital expenditure) £ billion, 2018/19 prices

Gross Fixed Capital Formation in Water, Sewerage and Waste (experimental measure)

£ billion, 2018 prices

0

1

2

3

4

5

6

0

2

4

6

8

10

12

Efficiency

7

0

20

40

60

80

100

120

140

160

180

1970

1972

1974

1976

1978

198

0

198

2

198

4

198

6

198

8

199

0

199

2

199

4

199

6

199

8

200

0

200

2

200

4

200

6

200

8

2010

2012

2014

2016

2018

Water, sewerage and waste Total market sector

Source: Commission calculation using ONS (2019) Multi-factor productivity (experimental): estimates.Notes: Waste is bundled with water supply and sewerage in the SIC 2007 classification Section E. This measurement of productivity may not reflect changes to quality of outputs.

Source: Frontier Economics (2017) Productivity improvement in the water and sewerage industry in England since privatisationNotes: Quality adjustments to output aim to take into account changes to the quality of service offered by the water industry, eg reductions in water pollution. UK water & sewerage industry is compared to productivity of EU KLEMS (capital, labour, energy, materials and services) comparator group, including EU water, energy, telecoms, construction and some manufacturing sectors. TFP of EU KLEMS sectors is not quality adjusted in the same way as UK water & sewerage TFP, which may affect comparability.


Multi-factor productivity (experimental measure)GVA/combined inputs, 1970=100Estimated total factor productivity (TFP) growth

Efficiency

8

Source: Markou and Waddams Price (1999) UK utilities: past reform and current proposals

Source: Commission calculations using water company data provided by OfwatNote: 2018/19 prices using GDP deflator


Growth in labour productivity, investment and profitability around water privatisation in 1989

Water and sewerage operating expenditure, 2018/19 pricesTotal, £ billion (left axis)

Per connected household, £ (right axis)

0

50

100

150

200

250

300

0

1

2

3

4

5

6

198

9-9

019

90

-91

199

1-9

219

92-

93

199

3-9

419

94

-95

199

5-9

619

96

-97

199

7-9

819

98

-99

199

9-0

020

00

-01

200

1-0

220

02-

03

200

3-0

420

04

-05

200

5-0

620

06

-07

200

7-0

820

08

-09

200

9-1

020

10-1

120

11-1

220

12-1

320

13-1

420

14-1

520

15-1

620

16-1

7

Pe

r co

nn

ect

ed

ho

use

ho

ld, £

To

tal,

£ b

illio

n

Total, £ billion Per connected household, £

Efficiency

9

0

1,000

2,000

3,000

4,000

5,000

6,000

199

2/9

3

199

3/9

4

199

4/9

5

199

5/9

6

199

6/9

7

199

7/9

8

199

8/9

9

199

9/0

0

200

0/0

1

200

1/0

2

200

2/0

3

200

3/0

4

200

4/0

5

200

5/0

6

200

6/0

7

200

7/8

200

8/9

200

9/1

0

2010

/11

2011

/12

2012

/13

2013

/14

2014

/15

2015

/16

2016

/17

2017

/18


Total leakage for England and Wales water companies Megalitres per day

Source: Water company data provided by Ofwat and Consumer Council for Water

Service quality

10

0

0.5

1

1.5

2

2.5

England and Wales Scotland Northern Ireland

Source: Drinking Water Inspectorate


Water quality tests failing in zones - % of samples

Everyday resilience

11

0

1

2

3

4

5

6

0

20

40

60

80

100

120

140

Source: Commission calculations using water company data provided by Ofwat, Water UK, Discover WaterNote: methodology changes may affect comparisons over time


Sewer flooding: flooded properties per 10,000 connected to sewerage

Properties below minimum standard of water pressure per 10,000 connections


0

50

100

150

200

250

300

350

Service quality

12



0

2

4

6

8

10

12

14

16

18

20

199

1-9

2

199

2-9

3

199

3-9

4

199

4-9

5

199

5-9

6

199

6-9

7

199

7-9

8

199

8-9

9

199

9-0

0

200

0-0

1

200

1-0

2

200

2-0

3

200

3-0

4

200

4-0

5

200

5-0

6

200

6-0

7

200

7-0

8

200

8-0

9

200

9-1

0

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

Annual sewer collapses per 1,000kmAnnual mains bursts per 1,000 km

Source: Commission calculations using water company data provided by OfwatNote: methodology changes may affect comparisons over time

Quality of user experience

13

0

1

2

3

4

5

6

7

8

9

10

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2006200720082009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Tru

st s

core

Sat

isfa

ctio

n w

ith

val

ue

fo

r m

on

ey

Satisfaction with value for money (left axis) and trust (right axis) for water and sewerage

Trust in companies (score out of 10)

Satisfaction with value for money Sewerage

Satisfaction with value for money Water

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Overall satisfaction with water and sewerage companies

Satisfaction with services Sewerage

Satisfaction with services Water

Source: Commission analysis of Consumer Council for Water annual tracking reports


Source: Commission analysis of Consumer Council for Water annual tracking reports

Sustainability/environment

14

Source: Environment Agency, Defra (2019) ENV15 - Water abstraction tables for England Source: Environment Agency, Defra (2018) Water conservation report

0

10

20

30

40

50

60

199

9-0

0

200

0-0

1

200

1-0

2

200

2-0

3

200

3-0

4

200

4-0

5

200

5-0

6

200

6-0

7

200

7-0

8

200

8-0

9

200

9-1

0

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18


Water abstraction in England: all surface and groundwaters, billion cubic metres

Household water meter penetration in England, %

0

2

4

6

8

10

12

14

16

18

20

Total abstraction Public water supply

0 20 40 60 80 100

PolandBulgaria

RomaniaSlovakiaAlbania

United KingdomEstoniaIreland

HungaryNetherlands

SwedenLuxembourgSwitzerland

FranceCzechia

LithuaniaFinland

EUSpain

SloveniaDenmarkBelgium

ItalyPortugalGermany

LatviaCroatiaGreeceAustria

MaltaCyprus

% of bathing water sites with excellent water quality, 2018


15

Source: Environment Agency (2019) Bathing water data Source: European Environment Agency (2019) European Bathing Water Quality in 2018. Annex 1, Bathing water quality results in 2018.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Bathing water quality in England % meeting standards

% passed, 1976 directive % higher, 1976 directive

% passed, 2006 directive % excellent, 2006 directive



16

0

500

1,000

1,500

2,000

2,500

3,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Number of pollution incidents for England water and sewerage companies

Serious pollution (Category 1&2) Other pollution (Category 3)

Source: Environment Agency (2019) Environmental performance of the water and sewerage companies in 2018



17

Source: Environment Agency (2018) The state of the environment: water quality

0

5

10

15

20

25

30

35

40

Ammonia Biological oxygendemand

Phosphorus

Pollutant loads to rivers from the water industry Annual load, thousand tonnes per year

1995 2000 2005 2010 2015

0

5

10

15

20

25

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

1974

1976

1978

198

0

198

2

198

4

198

6

198

8

199

0

199

2

199

4

199

6

199

8

200

0

200

2

200

4

200

6

200

8

2010

2012

Nit

rate

(m

g N

O3-

/l)

Ph

osp

ho

rus

(mg

P/l

)

Average annual concentrations of total reactive phosphorus and nitrates in English rivers

Phosphorus (left axis) Nitrate (right axis)


Source: Environment Agency (2018) The state of the environment: water quality


18

0

10

20

30

40

50

60

70

1980-84 1985-90 1990-94 1995-00 2000-04 2005-09 2010-14

Water Stress, %

UK France Netherlands Denmark Germany Australia

Source: Commission analysis of data from Food and Agriculture Organization of the United Nations, AquastatNote: Water stress = Total freshwater withdrawal, primary and secondary/(Total renewable water resources-Environmental Flow Requirements)


Prices and bills

19

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

Source: Commission calculations using water company data provided by OfwatNote: 2018/19 prices using CPI deflator

Source: Commission calculations using water company data provided by Ofwat and Living Costs and Food Survey, Office for National Statistics

£0

£50

£100

£150

£200

£250

£300

£350

£400

£450


Average water and sewerage bills for England and Wales, 2018-19 prices

Average water and sewerage bills as % of average household spending

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Real post-tax WACC (RPI) Cost of equity (post-tax) Cost of debt (post-tax) Real vanilla WACC (Thames Tideway Tunnel construction)

Financial performance

20

Source: Commission calculations using various Ofwat reportsNotes: WACC shown in post-tax terms due to lack of ‘vanilla’ WACC data for older price controls, except for Thames Tideway Tunnel WACC for which only ‘vanilla’ format is available. All WACCs and components are measured in real terms, using the Retail Price Index (RPI), and are plotted in the first year of the price control to which they applied.


Allowed Weighted Average Cost of Capital (WACC), cost of equity and cost of debt for water and sewerage price controls

* PR19 draft determinations


21

Source: Commission calculations using water company data provided by NAO (2015) The economic regulation of the water sector, and Ofwat (2019) Financial monitoring report 2017-18 Notes: Regulatory Capital Value (RCV) = Equity + Net debtMarch 2019 prices using RPI deflator

0

10

20

30

40

50

60

70

80

199

0-9

119

91-

92

199

2-9

319

93-

94

199

4-9

519

95-

96

199

6-9

719

97-

98

199

8-9

919

99

-00

200

0-0

120

01-

02

200

2-0

320

03-

04

200

4-0

520

05-

06

200

6-0

720

07-

08

200

8-0

920

09

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

Debt and equity in the water industry £ billion, Mar 2019 prices

Equity Net debt

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

199

0-9

119

91-

92

199

2-9

319

93-

94

199

4-9

519

95-

96

199

6-9

719

97-

98

199

8-9

919

99

-00

200

0-0

120

01-

02

200

2-0

320

03-

04

200

4-0

520

05-

06

200

6-0

720

07-

08

200

8-0

920

09

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

Water industry gearing

Source: Commission calculations using water company data provided by NAO (2015) The economic regulation of the water sector, and Ofwat (2019) Financial monitoring report 2017-18 Note: Gearing = Net debt / Regulatory Capital Value (RCV)



22

Source: Commission calculations using water company data provided by Ofwat (2019) Financial monitoring report 2017-18

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

An

glia

n

Dŵ

r C

ymru

No

rth

um

bri

an

Se

vern

Tre

nt

So

uth

We

st

So

uth

ern

Th

ame

s

Un

ite

d U

tilit

ies

We

sse

x

Yo

rksh

ire

Aff

init

y

Bri

sto

l

De

e V

alle

y

Po

rtsm

ou

th

SE

S W

ate

r

So

uth

Eas

t

So

uth

Sta

ffs

Actual 2016 Actual 2017 Actual 2018 Real regulatory allowance


Actual real cost of debt vs the regulatory allowance, 2016 to 2018

Energy

Volume

24

80

100

120

140

160

180

Energy 1990=100 Whole economy 1990=100


Source: Commission calculations using ONS (2019) GDP(O) low level aggregates, Chained Volume Measure.SIC 2007 section D (Electricity, gas, steam and air conditioning supply)

Energy sector output (Gross Value Added) relative to whole economy1990=100

Volume

25

Source: Department for Business, Energy & Industrial Strategy (2019) UK energy in brief, Table 25 Electricity CapacityNotes: (1) Includes coal, non-CCGT gas, oil and mixed/dual fired. Does not include thermal renewables. (2) CCGT = Combined Cycle Gas Turbine. (3) Renewable capacity is on an Installed Capacity basis. Data for other fuels/technologies relates to Declared Net Capacity from 1996 to 2005, data for 2006 onwards is transmission entry capacity (TEC)

0

100

200

300

400

500

600

700

1970

1973

1976

1979

198

2

198

5

198

8

199

1

199

4

199

7

200

0

200

3

200

6

200

9

2012

2015

2018

Town gas Natural gas

Electricity Other fuels excluding petroleum


Electricity generation capacity, GW

Source: Commission calculations using Department for Business, Energy & Industrial Strategy (2019) Energy Consumption in the UK, Table C1: Final Energy Consumption by sector and fuel

Final energy consumption by fuel, excluding petroleum, TWh

0

20

40

60

80

100

120

1996 2000 2005 2010 2015 2018

Conventional steam (1) CCGT (2) Nuclear

Pumped Storage Renewable (3)

Volume

26


0

1

2

3

4

5

1970

1972

1974

1976

1978

198

0

198

2

198

4

198

6

198

8

199

0

199

2

199

4

199

6

199

8

200

0

200

2

200

4

200

6

200

8

2010

2012

2014

2016

2018

Average electricity consumption per householdMWh/year

0

5

10

15

20

1970

1972

1974

1976

1978

198

0

198

2

198

4

198

6

198

8

199

0

199

2

199

4

199

6

199

8

200

0

200

2

200

4

200

6

200

8

2010

2012

2014

2016

2018

Average gas consumption per gas consuming householdMWh/year

Source: Ofgem (2019) State of the Energy Market, using data from Department for Business, Energy & Industrial Strategy (2019) Energy consumption statistics in the UK (1970-2018), and BEIS (2017) Historical gas data: gas production and consumption and fuel input (1920 to 2016). Note: The figure is not weather corrected as weather corrected data are available only since 2002

Source: Ofgem (2019) State of the Energy Market, using data from Department for Business, Energy & Industrial Strategy (2019) Energy consumption statistics in the UK (1970-2018), and BEIS (2017) Historical gas data: gas production and consumption and fuel input (1920 to 2016). Note: The figure is not weather corrected as weather corrected data are available only since 2002

Investment

27

Source: Commission calculation using ONS (2019) Quarterly acquisitions and disposals of capital assets survey (QCAS) investment made by energy industries Note: 2018 prices using GDP deflator

Source: Commission calculation using ONS (2019) Multi-factor productivity estimates: Experimental estimates to October to December 2018.Notes: SIC 2007 Section D: Electricity, gas, steam and air conditioning supply2018 prices using experimental implied GFCF deflator.


0

2

4

6

8

10

12

14

16

18

Gross Fixed Capital Formation in Electricity, gas, steam and air conditioning supply (experimental measure)

£ billion, 2018 prices

Annual investment in gas and electricity £ billion, 2018 prices

0

2

4

6

8

10

12

14

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

2015

2016

2017

2018

Gas and Electricity Electricity Gas

Investment

28

0

1

2

3

4

5

6

Electricity Transmission Electricity Distribution Gas Transmission Gas Distribution

Source: Commission calculation using data from OfgemNote: 2018/19 prices using GDP deflator


Annual capital expenditure on electricity and gas networks (gas since 2002/03)£ billion, 2018/19 prices

Investment

29

Source: Ofgem (2004) Electricity Distribution Price Control Review – Policy documentNotes: Historical trend of outturn capital expenditure by Distribution Network Operators: not a comprehensive measure of energy network investment.The chart also shows the first three Distribution Price Control (DPCR) periods.2002/03 prices


Historic gross capital expenditure by District Network Operators (DNOs)

Efficiency

30

Source: Commission calculation using ONS (2019) Multi-factor productivity (experimental): estimates.Notes: SIC 2007 Section D: Electricity, gas, steam and air conditioning supply. This measurement of productivity may not reflect changes to quality of outputs.


Growth in labour productivity, investment and profitability around gas privatisation in 1986

Multi-factor productivity (experimental measure)GVA/combined inputs, 1970=100


0

50

100

150

200

250

300

350

400

1970

1972

1974

1976

1978

198

0

198

2

198

4

198

6

198

8

199

0

199

2

199

4

199

6

199

8

200

0

200

2

200

4

200

6

200

8

2010

2012

2014

2016

2018

Section D: Electricity, gas, steam and air conditioning supply

Total market sector

0

5

10

15

20

25

199

0/9

1

199

1/9

2

199

2/9

3

199

3/9

4

199

4/9

5

199

5/9

6

199

6/9

7

199

7/9

8

199

8/9

9

199

9/0

0

200

0/0

1

200

1/0

2

200

2/0

3

200

3/0

4

200

4/0

5

200

5/0

6

200

6/0

7

200

7/0

8

200

8/0

9

200

9/1

0

2010

/11

2011

/12

2012

/13

2013

/14

2014

/15

2015

/16

2016

/17

Electricity Gas

0

2

4

6

8

10

12

14

16

18

199

0/9

119

91/

92

199

2/9

319

93/

94

199

4/9

519

95/

96

199

6/9

719

97/

98

199

8/9

919

99

/00

200

0/0

120

01/

02

200

2/0

320

03/

04

200

4/0

520

05/

06

200

6/0

720

07/

08

200

8/0

920

09

/10

2010

/11

2011

/12

2012

/13

2013

/14

2014

/15

2015

/16

2016

/17

Electricity Gas

Efficiency

31


Source: Commission calculation using data from OfgemNotes: Operational expenditure (opex) for all electricity and gas distribution and transmission companies, divided by total electricity/gas supplied.2018/19 prices using GDP deflator

Source: Commission calculation using data from OfgemNotes: Total expenditure (totex) for all electricity and gas distribution and transmission companies, divided by total electricity/gas supplied.2018/19 prices using GDP deflator

Network operational expenditure per units supplied £ per MWh, 2018/19 prices

Network total expenditure per units supplied £ per MWh, 2018/19 prices

Efficiency

32

0%

2%

4%

6%

8%

10%

12%

1970

1972

1974

1976

1978

198

0

198

2

198

4

198

6

198

8

199

0

199

2

199

4

199

6

199

8

200

0

200

2

200

4

200

6

200

8

2010

2012

2014

2016

Losses in transmission and distribution, % of net electricity supplied

Major power producers (old method)

All generating companies (new method)

Source: Office for National Statistics (2019) Workforce jobs by industryNote: SIC 2007 Section D: Electricity, gas, steam and air conditioning supply

Source: Commission calculations using Department for Business, Energy & Industrial Strategy (2019) Digest of UK Energy Statistics (DUKES) 2018: long-term trends, Table 5.1.2 Electricity supply, availability and consumption.Note: Losses on the public distribution system (grid system and local networks) and other differences between data collected on sales and data collected on availability.


0

50

100

150

200

250

300

1979

198

1

198

3

198

5

198

7

198

9

199

1

199

3

199

5

199

7

199

9

200

1

200

3

200

5

200

7

200

9

2011

2013

2015

2017

2019

UK workforce jobs in Electricity, gas, steam and air conditioning supply sector, 000s

Everyday resilience

33

Source: Various Ofgem and Offer reports on performance of the distribution and transmission system

0

30

60

90

120

150

0

50

100

150

200

250

199

0/9

1

199

1/9

2

199

2/9

3

199

3/9

4

199

4/9

5

199

5/9

6

199

6/9

7

199

7/9

8

199

8/9

9

199

9/0

0

200

0/0

1

200

1/0

2

200

2/0

3

200

3/0

4

200

4/0

5

200

5/0

6

200

6/0

7

200

7/0

8

200

8/0

9

200

9/1

0

2010

/11

2011

/12

2012

/13

2013

/14

2014

/15

2015

/16

2016

/17

2017

/18

Inte

rru

pti

on

s p

er

100

cu

sto

me

rs

Min

ute

s lo

st p

er

cust

om

er

Minutes lost (old method) Minutes lost (new method) Supply interruptions (old method) Supply interruptions (new method)


Electricity supply average minutes lost per customer (left axis) and interruptions per 100 customers (right axis)

Everyday resilience

34

0.0

0.5

1.0

1.5

2.0

2.5


0

50

100

150

200

250

300

350

2002 2003200420052006200720082009 2010 2011 2012 2013 2014 2015 2016


Source Council of European Energy Regulators (CEER) - Benchmarking Report 6.1; Australian Energy Regulator (2019) State of the energy market 2018Notes: System Average Interruption Duration Index (SAIDI) refers to the average outage (Loss of electricity access) duration for each customer served. Measured in minutes per customer.


Source: Council of European Energy Regulators (CEER) - Benchmarking Report 6.1; Australian Energy Regulator (2019) State of the energy market 2018Notes: System Average Interruption Frequency Index (SAIFI) refers to the average number of energy supply interruptions that a customer would experience. Measured in interruptions per customer.

Unplanned System Average Interruption Frequency Index (SAIFI), including exceptional events, electricity,

interruptions per customer

Unplanned System Average Interruption Duration Index (SAIDI), including exceptional events, electricity,

minutes per customer


35

Source: Supplier data from Ofgem data portal, Customer ServiceNote: Complaints data for energy retail suppliers

0

1

2

3

4

5

6

7

8

9

10

2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Source: OfgemNote: Satisfaction data for electricity distribution network operators


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Q2

2014

Q3

2014

Q4

20

14

Q1

2015

Q2

2015

Q3

2015

Q4

20

15

Q1

2016

Q2

2016

Q3

2016

Q4

20

16

Q1

2017

Q2

2017

Q3

2017

Q4

20

17

Q1

2018

Q2

2018

Q3

2018

Q4

20

18

Q1

2019

Q2

2019

Six large Medium Small Average

Complaints received by energy retail suppliers per 100,000 customer accounts, by supplier group

Electricity distribution customer satisfaction,average satisfaction score out of 10


36

0

50

100

150

200

250

30019

90

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

2015

2016

2017

2018

Million tonnes carbon dioxide equivalent (MtCO2e) from energy supply

Source: Department for Business, Energy & Industrial Strategy (2019) Provisional UK greenhouse gas emissions national statistics



37

Source: Eurostat energy database, Share of energy from renewable sources

0

10

20

30

40

50

60

70

80

90

100

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

UK France Netherlands Denmark Germany

40

60

80

100

120

140

160

180

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016


Source: European commission directorate general for energy (EC DG ENER), Energy statistical country datasheets


Share of electricity production from a renewable source, % Greenhouse gas emissions from energy industries 1990 = 100

0%

2%

4%

6%

8%

10%

12%

14%

16%

1970

1972

1974

1976

1978

198

0

198

2

198

4

198

6

198

8

199

0

199

2

199

4

199

6

199

8

200

0

200

2

200

4

200

6

200

8

2010

2012

2014

2016

Energy cost as a % of total household expenditure, by income decile

Lowest income decile Highest income decile All households

Prices and bills

38

Source: Ofgem and Commission analysis of Office for National Statistics Living Costs and Food Survey

Source: Commission calculations using Office for National Statistics Living Costs and Food SurveyNote: 2018-19 prices using GDP deflator


£0

£200

£400

£600

£800

£1,000

£1,200

£1,400

£1,600

1970

1972

1974

1976

1978

198

0

198

2

198

4

198

6

198

8

199

0

199

2

199

4

199

6

199

8-9

9

200

0-0

1

200

2-0

3

200

4-0

5

200

6-0

7

200

8-0

9

2010

-11

2012

-13

2014

-15

2016

-17

Average annual household spending on energy, 2018-19 prices

All energy Electricity Gas Other sources

Prices and bills

39

Source: Commission calculation using Department for Business, Energy & Industrial Strategy (2019) Historical electricity data Notes: Net selling values provide an indication of typical prices paid in broad sectors, using data from energy supply companies.2018 prices using GDP deflator


Average net selling value of electricity - all consumers p/kWh, 2018 prices

0

5

10

15

20

25

30

35

40

45

50

1921

1925

1929

1933

1937

194

1

194

5

194

9

1953

1957

196

1

196

5

196

9

1973

1977

198

1

198

5

198

9

199

3

199

7

200

1

200

5

200

9

2013

2017

Average electricity and gas bills components, 2018 prices

£30 £30 £27 £28 £31 £37 £29 £27

£56 £101 £85 £102

£33 £78

£10 £8

£130

£126 £159 £149

£145

£141

£151 £144

£410 £367

£306 £307 £448

£524

£426 £389

£0

£100

£200

£300

£400

£500

£600

£700

£800

2008 2012 2016 2018 2008 2012 2016 2018

Electricity Gas

Energy, supplier costs and margin

Network

Environmental, policy and social obligations, other

VAT

Source: Commission calculations using proportions from breakdowns of typical domestic energy bills from various historic Ofgem publications, and BEIS (2019) Annual domestic energy bills, average actual consumption.Note: 2018 prices using GDP deflator

Prices and bills

40

Source: Department for Business Energy & Industrial Strategy (2019) Domestic gas prices in the IEANote: 2018 prices using national GDP deflators, OECD


Source: Department for Business Energy & Industrial Strategy (2019) Domestic electricity prices in the IEANote: 2018 prices using national GDP deflators, OECD

Domestic gas price in pence per kWh (including taxes) 2018 prices

Domestic electricity price in pence per kWh (including taxes) 2018 prices

0

5

10

15

20

25

30

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018


0

1

2

3

4

5

6

7

8

9

10

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016



41

Source: Ofgem data portalSource: Commission analysis of Ofgem dataNote: Cost of capital measured as Vanilla Weighted Average Cost of Capital (WACC), real terms using Retail Price Index (RPI). WACCs are plotted in the first year of the price control to which they applied.

0%

1%

2%

3%

4%

5%

6%

200

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Electricity transmission Gas transmission

Electricity distribution Gas distribution

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Pre-tax domestic supply margins of large suppliers, combined gas and electricity


Allowed Weighted Average Cost of Capital (WACC) for energy networks


42

Source: Ofgem (2019) Regulatory Financial Performance annex to RIIO-1 annual reports 2017-18, Individual Licensee Regulatory Financial Performance Reporting TemplatesNotes: Gearing defined as Net Debt as a proportion of Regulated Asset Value.Cadent has one licence but operates four gas distribution networks.


0%

10%

20%

30%

40%

50%

60%

70%

80%

EN

WL

NP

gN

NP

gY

SP

D

SP

MW

SS

E-S

EP

D

SS

E-S

HE

PD

UK

PN

-EP

N

UK

PN

-LP

N

UK

PN

-SP

N

WP

D-E

MID

WP

D-W

MID

WP

D-S

Wal

es

WP

D-S

We

st

Cad

en

t

NG

N

SG

N-S

cotl

and

SG

N-S

ou

the

rn

WW

U

NG

ET

SP

T

SH

ET

NG

GT

Electricity Distribution Gas Distribution Elec Transmission GT

Gearing in energy networks

2014 2015 2016 2017 2018

Telecoms

Volume

44

50

100

150

200

250

300

350

400

450

500

550

Telecoms 1990=100 Whole economy 1990=100


Source: Commission calculations using ONS (2019) GDP(O) low level aggregates, Chained Volume Measure.SIC 2007 division 61 (Telecommunications)Note: Telecommunications output is particularly sensitive to the choice of methodology for quality adjustment in price deflation: this may have resulted in underestimation of telecoms output growth. For a discussion, see Abdirahman et al for the Economic Statistics Centre of Excellence (2017) A Comparison of Approaches to Deflating Telecoms Services Output

Telecommunications output (Gross Value Added) relative to whole economy1990=100

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2010 2011 2012 2013 2014 2015 2016 2017 2018

O2/Telefonica UK EE

Vodafone Three UK

Total of identified providers

Investment

45

Source: Commission calculations using company annual reports, Refinitiv Eikon for data extractionNotes: Where possible, segmental reporting in company accounts has been used to identify capital expenditure (capex) in the UK, but some capex outside the UK by operators may remain in the data.2018 prices using GDP deflator


Annual capital expenditure by mobile network operators £ billion, 2018 prices

Annual capital expenditure by fixed telecoms operators£ billion, 2018 prices

Source: Commission calculations using company annual reports, Refinitiv Eikon for data extractionNotes: Where possible, segmental reporting in company accounts has been used to identify capital expenditure (capex) in the UK, but some capex outside the UK by operators may remain in the data. 2018 prices using GDP deflator

0

1

2

3

4

5

6

OpenreachBT Group minus Openreach, mobile and global servicesVirgin MediaSkyTalkTalkCityFibreTotal for identified providers

Investment

46

Source: Office for National Statistics (2019) Annual gross fixed capital formation by industry and assetNote: SIC 2007 division 61 (Telecommunications)


0

2

4

6

8

10

12

14

16

18

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Gross Fixed Capital Formation in telecommunications £ billion

Current prices Chained Volume Measure

Efficiency

47


Growth in labour productivity, investment and profitability around telecoms privatisation in 1984


Volume & service quality

48

Measure 2007 2012 2017 2018

Average monthly mobile data per active connection N/A 0.24 GB 2.33 GB 2.91 GB

Fixed broadband uptake, % of households 52%* 72% 82% 80%

Superfast broadband connections N/A 3.1 million 13.4 million 15.6 million

Average broadband speeds 3.6 Mbit/s** 12 Mbit/s 46.2 Mbit/s 54.2 Mbit/s

Average monthly data per residential fixed broadband line

N/A 23 GB 190 GB 240 GB

Fixed voice call minutes, total 149 billion 103 billion 54 billion 44 billion

Mobile voice call minutes, total 105 billion 132 billion 154 billion 161 billion

Mobile outdoor voice coverage for all operators, % of UK landmass

N/A 59%*** 69% 78%

Mobile outdoor 4G coverage for all operators, % of UK landmass with at least 2 Mbit/s

N/A N/A 49% 66%

Mobile outdoor 3G coverage for all operators, % of UK landmass

N/A 20% 70% 83%

Sources: Ofcom (2019, 2018, 2012) Communications Market Reports; Ofcom (2018) Connected Nations Report; Ofcom (2012) Infrastructure Report; Ofcom (2009) UK broadband speeds 2008.Note: Revisions and methodology changes may affect comparisons over time.

* Total broadband uptake** Figure for 2008*** 2G coverage


0

10

20

30

40

50

60

70

80

90

100

2011 2012 2013 2014 2015 2016 2017 2018


Service quality

49

Source: European Commission (2019) Digital Agenda Scoreboard Indicators

Households with fibre to the premises (FTTP) coverage, %



50

Source: The Institute of Customer Service (2019) UK Customer Satisfaction Index


UK Customer Satisfaction Index Score, out of 100

73.7

74.4

74.2

75.0

76.1

78.7

79.5

78.7

80.7

80.0

79.8

81.3

82.0

71.8

73.8

74.4

75.7

76.1

76.9

78.9

79.8

80.3

80.3

80.4

80.6

81.6

0 10 20 30 40 50 60 70 80 90 100

Transport

Utilities

Telecommunications & Media

Public Services (Local)

Public Services (National)

Services

Automotive

Insurance

Tourism

Leisure

Banks & Building Societies

Retail (food)

Retail (non-food)

January 2019 January 2018

0%

1%

2%

3%

4%

5%

0

30

60

90

120

150

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

2015

2016

2017

2018

CMR2005

CMR 2008 Pricing report 2018 CMR 2019

% o

f h

ou

seh

old

sp

en

din

g

Ave

rag

e m

on

thly

sp

en

d, £

Mobile Fixed internet

Fixed voice Fixed voice and internet

% of total household spending

Prices and bills

51

Source: Abdirahman et al. for Economic Statistics Centre of Excellence (2017) A Comparison of Approaches to Deflating Telecoms Services Output.Notes: This research illustrates that changes in headline telecoms prices do not necessarily reflect underlying improvements in the quality of telecoms services. This has implications for the price deflation of telecoms output, potentially resulting in an underestimate of telecoms output growth. In this example, the authors compare an improved version of the Services Producer Price Index (SPPI) with a ‘data usage approach’ which divides total revenue in the industry by the total data volume, to give an average price per bit of datatransported.

Source: Commission analysis of Ofcom Communications Market Reports (CMR) and pricing reports; Office for National Statistics Living Costs and Food SurveyNotes: Mobile telecoms in 2018 does not include spend on handsets due to a change in accounting standards, so is not directly comparable with earlier years.Methodology changes over time mean that price trends from different reports may not be comparable. 2018 prices using GDP deflator


Average household monthly spend on telecoms services£, 2018 prices

Impact of quality adjustment methodology on telecoms price deflators

Prices and bills

52

Source: International Telecommunication Union - World Telecommunication/ICT Indicators DatabaseNote: Average of prices across three years 2015 to 20172018 prices using national GDP deflators, OECD


0

5

10

15

20

25

30

35

40


Price of 1GB mobile broadband Fixed broadband monthly subscription fee

Average price of broadband and mobile, £ (2015-2017 average), 2018 prices


53


0%

1%

2%

3%

4%

5%

6%

7%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Weighted Average Cost of Capital (WACC) estimates for telecoms segments and charge controls, where available

Source: Commission calculations using various UKRN Cost of Capital Update Reports, and various Ofcom reports.Note: Cost of capital measured as Vanilla Weighted Average Cost of Capital (WACC), real terms using Retail Price Index (RPI). Cost of capital assessment of telecoms segments (eg Openreach, Rest of BT etc) usually undertaken by Ofcom in preparation for charge controls.

Cross-sector

Investment and volume

55


0%

5%

10%

15%

20%

25%

30%

Business investment share Gross Value Added (GVA) share

Share of business investment and Gross Value Added (GVA) from water, energy, telecoms and other industries, 2018 (Each series sums to 100%)

Sources: Gross Value Added (GVA) from ONS (2019) GDP output approach – low-level aggregates. Water investment from water company data provided by Ofwat. Energy investment from ONS (2019) Quarterly acquisitions and disposals of capital assets survey (QCAS) investment made by energy industries. Telecoms investment from telecoms company annual reports, Refinitiv Eikon for data extraction. Other business investment from ONS (2019) Business investment by industry and asset


56

Source: Commission analysis of data from Ofwat, Ofgem, Ofcom and UK Regulators Network (UKRN)Notes: Cost of capital measured as Vanilla Weighted Average Cost of Capital (WACC), real terms using Retail Price Index (RPI). Combination of WACC allowances for price controls (water and energy) and WACC estimates for charge controls (telecoms).Thames Tideway Tunnel construction = TTT.


0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Energy Telecoms Water TTT construction

*

Weighted Average Cost of Capital (WACC) estimates and allowances, where available

* 2020 based on PR19 draft determinations for water and expected WACC for energy

Prices and bills

57

Source: Commission calculations using ONS (2019) Consumer price inflation tables, CPIH Detailed indices annual averagesNotes: Consumer Prices Index including owner occupiers’ housing costs (CPIH) indices used are: 04.4 Water supply and misc. services for the dwelling, 04.5.1 Electricity, 04.5.2 Gas, 08.2/3 Telephone and telefax equipment and services, and CPIH (overall index)All rebased to 1988=100


50

100

150

200

250

300

350

400

450

500

Price indices for electricity, gas, water, sewerage and telecoms compared to average consumer price inflation (CPIH), 1988=100

Water & sewerage Gas Electricity Telecoms Average CPIH

0 2 4 6 8 10 12 14 16

LuxembourgUnited Kingdom

IcelandFinland

MaltaCyprus

NetherlandsPortugal

EstoniaFrance

LithuaniaItaly

AustriaSpain

GermanySwedenKosovo

BelgiumLatvia

RomaniaGreece

DenmarkHungaryBulgariaSloveniaCzechiaPolandSerbia

Slovakia

% of total household consumption expenditure on water, energy and telecoms, 2017

Water Energy Telecoms

Prices and bills

58

0 500 1,000 1,500 2,000 2,500

BulgariaRomania

SerbiaHungary

MaltaEstonia

LatviaLithuaniaPortugal

CyprusCzechiaIrelandPolandGreeceFinland

United KingdomSpain

NetherlandsSloveniaSlovakia

FranceItaly

LuxembourgBelgium

GermanyIcelandAustria

SwedenDenmark

Household expenditure on water, energy and telecoms: 2017 current prices, euro per capita

Water Energy Telecoms

Source: Eurostat, Final consumption expenditure of households by consumption purpose (COICOP 3 digit)


Source: Eurostat, Final consumption expenditure of households by consumption purpose (COICOP 3 digit)

Prices and bills

59

Source: Commission analysis of Office for National Statistics (2019) Family spending in the UK: April 2017 to March 2018Notes: The % of total household expenditure spent on water, energy and telecoms is not on the same basis as the international comparisons chart, which uses a national accounts approach to measuring household consumption.2017-18 data, in 2018-19 prices using GDP deflator


0%

2%

4%

6%

8%

10%

12%

14%

16%

0

10

20

30

40

50

60

70

80

Lowest 10% 2 3 4 5 6 7 8 9 Highest 10%

% to

tal

ho

use

ho

ld e

xpe

nd

itu

re

Ave

rag

e w

ee

kly

spe

nd

, £

Gross income decile group of household

Average weekly spending by households on water, energy and telecoms, by level of household income

Water, £ per week Energy, £ per week Telecoms, £ per week % of total household expenditure (right axis)

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