One of the energy companies’ main arguments against a price cap has collapsed after the competition watchdog’s alternative plan to help consumers was shelved indefinitely. The industry has argued that reforms proposed by the Competition and Markets Authority last year should be allowed to work before the government intervenes further in the market. However, the CMA’s principal recommendation, a database giving rival suppliers the contact details of households that have not switched, has been kicked into the long grass after problems in trials. Ofgem, the regulator implementing the database, emailed suppliers on Friday to say that it was deferring the April 2018 rollout date set by the CMA. It gave no revised date, saying that it wanted to continue testing variants of the plan and would issue an updated timetable by December, depending on the outcome of the tests. It has already said that the database – dubbed a “spammer’s charter” by critics – will not go ahead unless trials are successful.
Times 15th May 2017 read more »
Britain’s second largest energy company has warned the regulator that a price cap for standard tariffs must be based on robust methodology if it is to avert serious consequences for the retail market. Alistair Phillips-Davies, chief executive of SSE, said the success of the Conservative party’s election pledge for a market-wide cap on energy prices depends on Ofgem taking stock of the complexities, risks and costs of supplying energy. The price must be set objectively, be regularly reviewed and be based on a full understanding of market realities, he warned. Writing in the Telegraph the Big Six boss said that failing to take an objective approach could result in “serious consequences” for suppliers, and warned that it may do more harm than good to competition.
Telegraph 14th May 2017 read more »
With the Conservative and Labour manifestos expected this week, it seems likely that some form of government intervention in the energy supply market is now probable after the general election. It appears a ‘cap’ on household tariffs will be introduced. The energy sector is used to being in the political spotlight and in providing homes and businesses with an essential service, such scrutiny is to be expected. The issue facing energy suppliers like the one I lead is how to respond. At SSE we know customers’ interests are best served by suppliers working with government, not against it. As a major energy supplier we believe customers’ best interests are served by competition, not caps. But if a cap is to be introduced, we will work constructively throughout the consultation and implementation processes; and our focus will be on how to devise a cap that fits the needs of customers, in a way that is sustainable for the period it is in operation. That said, many independent commentators have noted that a cap could risk restricting customers’ choice of products, damage competition or limit people’s desire to switch – especially if they believe that prices are regulated or if prices become clustered around a mandated cap. These are very possible outcomes if any cap is hastily or badly designed and clumsily imposed into a dynamic and competitive market. Energy prices have increased steadily in recent years. This isn’t due to profiteering energy companies – analysis shows industry profits have remained broadly flat, in our case averaging around £80 a year per customer, making it a relatively low-margin sector compared to other utilities such as mobile phones or broadband. While the recent Competition and Markets Authority investigation alleged that energy customers were paying £1.4 billion a year more than they needed to, this is very hard to substantiate given it would far exceed the combined profitability of the whole market.
Telegraph 14th May 2017 read more »