On 25 October 2010 the recently established Infrastructure UK published (jointly with HM Treasury) the National Infrastructure Plan 2010 (NIP).

The NIP analyses the major infrastructure development needed in the UK, describes policy and regulatory changes the government will make to encourage infrastructure investment and sets out the specific steps the government is taking to achieve the infrastructure it is seeking in each focus area.

The NIP has a particular focus on the regulated sectors. Infrastructure UK has identified a number of issues with the existing regulatory regime and the NIP sets out a variety of further actions to be taken to address these. The NIP goes on to set out the government's programme and specific commitments relating to its focus areas of energy, transport, digital communications, floodwater, waste management and science.

It is unconnected to the OFT's independent ongoing "stock-take" of UK infrastructure ownership and control, which resulted in the publication of an initial working paper on 6 September 2010 (see our LawNow, OFT publishes infrastructure ownership and control stock-take working paper). The aim of the OFT's review, above and beyond mapping ownership and control across the UK infrastructure, is to analyse how ownership of infrastructure assets might affect outcomes for consumers and to gather evidence to test possible approaches to competition in these sectors.

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On 25 October 2010 the recently established Infrastructure UK published (jointly with HM Treasury) the National Infrastructure Plan 2010 (NIP). This focuses on the UK's economic infrastructure in energy, transport, digital communications, floodwater, waste management and science.

The NIP analyses the major infrastructure development needed in the UK, describes policy and regulatory changes the government will make to encourage infrastructure investment and sets out the specific steps the government is taking to achieve the infrastructure it is seeking in each focus area.

It is unconnected to the OFT's independent ongoing "stock-take" of UK infrastructure ownership and control, which resulted in the publication of an initial working paper on 6 September 2010 (see our LawNow, OFT publishes infrastructure ownership and control stock-take working paper). The aim of the OFT's review, above and beyond mapping ownership and control across the UK infrastructure, is to analyse how ownership of infrastructure assets might affect outcomes for consumers and to gather evidence to test possible approaches to competition in these sectors.

Regulated Sectors

The NIP notes that a significant part of the required investment is in sectors with independent economic regulation, such as energy and water.

The government considers that the existing regime of independent economic regulation has achieved significantly higher levels of investment than that delivered before privatisation.

However, Infrastructure UK has identified a number of issues relating to whether the existing regime remains fit to respond to the future investment challenge, including a lack of clarity concerning how regulators should balance their many duties, insufficient long-term strategic direction and limited dialogue between regulators on how they achieve common objectives.

The government intends to take the following actions to address these issues:

  • A review of the roles and functions of OFGEM and OFWAT, to be completed by Summer 2011.
  • Infrastructure UK will publish a common set of principles for economic regulation, together with the Department for Business, Innovation and Skills (BIS), by the end of 2010.
  • BIS will co-ordinate work across Departments and regulated sectors to ensure that competition and consumer outcomes are delivered effectively, in the context of the government's wider reforms of competition and consumer bodies.
  • Consideration of whether to extend the use of the regulatory asset base model (RABM). The RABM is used by regulators as a mechanism for providing a credible commitment to the recovery of sunk costs associated with capital investment by regulated monopolies. Extending the use of the RABM is one of several options being investigated for encouraging infrastructure investment from new sources of efficiently priced private capital, with a report due in Spring 2011.

Drawing on the conclusions from these reviews the government intends to report on whether further cross-sectoral action is required by Summer 2011.

New hierarchy for infrastructure investment

The NIP sets out a new hierarchy of investment decisions:

  • First, public money should be used to make better use of existing assets, such as the programme to allow motorway hard shoulders to be used at busy times.
  • Next, public investment should be targeted at tackling "stress points" in the networks, such as road and rail bottlenecks.
  • Finally, major investment in new infrastructure should only be undertaken where maintenance or small-scale investment will not meet future needs.

Specific plans for focus areas

The NIP goes on to set out the government's programme and commitments in its six focus areas, i.e. energy, transport, digital communications, floodwater, waste management and science. These include:

  • Reform of the electricity market to attract the private sector investment needed to meet the UK's climate change and energy security objectives (including the investment in nuclear, carbon capture and storage and renewable technologies).
  • Review of national electricity network regulation to ensure the necessary investment in transmission infrastructure to connect new low-carbon generation (such as wind turbines and nuclear power stations).
  • Modification of the gas grid's regulatory regime to enable biomethane producers to earn a return on gas fed into the grid and to introduce a Renewable Heat Incentive to support this immature technology.
  • Reform, improving efficiency and value for money of the railway infrastructure.
  • Publication of a National Broadband Strategy in December 2010, encouraging the private sector to invest in super-fast broadband networks.
  • Release of electromagnetic spectrum from public sector and other uses, which can be acquired by mobile operators for expansion and improved provision of mobile broadband services.
  • Consideration of whether the current approach to water policy and regulation will meet future needs (with a Water White Paper intended to be published in Summer 2011).

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 27/10/2010.