Submission by the Energy Policy Group (EPG) of the University of Exeter to the BEIS Call for Evidence on the Helm Review. Catherine Mitchell, Helen Poulter, Matthew Lockwood, Bridget Woodman, Rachel Bray, Richard Lowes, Jess Britton and Richard Hoggett.The table below sets out the issues that the EPG agrees with in the Helm Review, and the issues we do not agree with. On some issues, we semi-agree with Helm. In these cases, we tend to agree with the problem but not with his solution.
IGov 10th Jan 2018 read more »
Britain’s energy regulator has apologised for not acting sooner to cap bills for vulnerable households as he came under fire from MPs for his “passive” approach. Dermot Nolan, chief executive of Ofgem, admitted the regulator “should have done better” in protecting low-income households from high energy costs. MPs accused Mr Nolan of acting “like a bystander rather than an active participant” as he gave evidence to the Commons business committee on efforts to rein in bills.
FT 10th Jan 2018 read more »
STEPHEN LITTLECHILD: An energy price cap will damage the industry. Here’s a viable alternative. First, the low prices offered by about 50 small, new entrants are subsidised. Suppliers with under 250,000 customers are exempt from certain environmental and social costs imposed on larger suppliers. Second, the viability of present low prices is not yet established. Only last week, new entrant Brighter World Energy dropped out “because we no longer believe that market conditions, or our underlyin g operation, make for a sustainable business model”. Most suppliers cannot survive by charging a uniform price. At a high price they lose customers and can’t replace them. At a low price they don’t cover total costs. So they need the ability to attract new customers at lower prices than they charge existing customers. A relative price cap would jeopardise the competitive market. There is documented evidence. In 2008, Ofgem’s non-discrimination clause removed suppliers’ ability to charge differential prices. Suppliers responded by eliminating their lower prices, customer switching and competition were reduced, and industry profits rose. Although the present retail market is competitive, there is none the less a public concern that could be addressed. Many people think the Big Six suppliers have had it too easy. They have not had to fight to attract loyal customers, by demonstrating consistently lower prices or better customer service. New entrants have had a more challenging task. They can acquire price-sensitive customers quickly by pricing low, but building up a reputation to attract loyal customers takes time. Thus, for historical reasons, the Big Six suppliers are not under as much competitive pressure as the entrants. At privatisation, the retail part of the market was not restructured. Can we now speed up the competitive process by doing so? I suggest we can, by adopting an approach that proved successful in generation. To avoid investigation and possible further measures, the “Big Two” generators (National Power and PowerGen) accepted a regulatory invitation to sell 10pc of their total capacity to new entrants. This had to be existing mid-merit plant, where competition was least effective, rather than base load plant that entrants themselves were building. After the disposals, competition increased.
Telegraph 9th Jan 2018 read more »