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Power and utilities companies rank compliance and regulation as biggest concern


May 27, 2013
By Alyssa Dalton

May 27, 2013 – According to a new Ernst & Young survey, responding to frequently changing regulations and managing the effect on business and stakeholders are now the biggest concerns for power and utilities executives around the world—up from 2011.

“For Canadian power and utilities companies, managing changing regulatory structures in different jurisdictions has been a growing challenge,” said Steve Power, partner and Canadian Power & Utilities leader at Ernst & Young. “Improving their ability to anticipate future regulatory changes, and communicate how those changes will affect their stakeholders will be critical to their success.”

Business Pulse: Exploring dual perspectives on the top 10 risks and opportunities in 2013 and beyond finds that, while governments and regulators around the globe continue to pursue low-carbon generation and energy efficiency, consumers are becoming increasingly price sensitive.

“Consumers are at the heart of the complex relationship between power and utilities companies, regulators and policy-makers,” said Power. “With electricity prices expected to increase, companies that make the most of smart technology and other innovations to shape how they interact with consumers will be better positioned for growth and profitability.”

The report notes that the traditional business model of supplying, metering and billing is shifting to adapt to changing stakeholder requirements.

“The focus is moving from purely providing energy, to promoting energy efficiency,” he said.

According to the survey the top 10 risks and opportunities for power and utilities companies in 2013 are:

Risks:
• Compliance and regulation
• Commodity price volatility and access to competitively priced long-term fuel supplies
• Political intervention in power and utilities (P&U) markets
• Uncertainty in climate policy and carbon pricing
• Significant shifts in the cost and accessibility of capital
• Capital project execution
• Economic shocks and resulting short-term energy demand shocks
• War for talent
• Aging generation and network infrastructure
• Managing planning and public acceptance

Opportunities:
• Rising emerging markets’ energy demand
• Acquisitions or alliances to gain new capabilities
• Growth in energy and ancillary service markets
• Enhancing relationships with external regulatory and compliance bodies
• Improving public perceptions
• Increased focus on investor relations programs and communications
• Integration of distributed energy resources
• Increased investment in generation capacity and delivery infrastructure in emerging markets
• Rising energy innovation in emerging markets
• Improving onshore and offshore wind supply chain efficiency

“We’re seeing Canadian power and utilities companies expand in Canada and beyond, and build out their renewable assets through acquisitions,” added Power. “But with new markets and jurisdictions come new compliance and regulation, and other issues. P&U companies really need a robust forward-view of all the risks—and opportunities—to effectively respond to change, understand what drives cost and value and engage closely with all stakeholders.”