We recently published our thoughts to two BEIS retail market consultations.
BEIS: Opt-in switching and testing Opt-out Switching Consultation
BEIS published their consultation on the next phase of opt-in switching and testing opt-out switching in July 2021.
Since publication there have been a number of significant challenges and changes in the domestic energy market, we have seen drastic and sustained increases in wholesale prices, which have led to unprecedented instability in the retail sector. In our response to the consultation, we questioned whether it is right to proceed with the proposals at this time.
We suggested that BEIS pause in order to allow prices to stabilise and for remaining energy suppliers to find a firmer financial footing before reconsidering the proposals in context of the changed market dynamics. We considered that this should include the distortions relating to the energy price cap being addressed.
We understand that BEIS is seeking to improve consumer engagement and ensure that those who do not actively seek out better value tariffs are not unduly disadvantaged.
We wholly support this aim. However, we believe the BEIS proposal does not address the fundamental issues of why consumers are disengaged and offers only temporary relief.
The proposal is narrowly focused on switching options and in our view adds a layer of unnecessary administration and cost without significant benefit to the consumer or the domestic energy market.
We suggested that alternative approaches, such as incumbent suppliers undertaking a more pro-active role with direct communications, much like the current practice in telecoms or banking, would be able to achieve the same or greater levels of engagement.
The introduction of a similar approach could be implemented with relatively little upheaval to consumers and industry, promote significant engagement and combat the loyalty penalty.
It is now timely to review and reshape the energy retail offering to consumers, and any decision to proceed with mandatory collective switching should be considered in context of that wider review. You can find our full response here.
BEIS & Ofgem: Industry Code Governance Reform
July also saw the publication of further proposals on the Industry Codes Review, following up on the initial proposals of July 2019 around the creation of a strategic body with greater oversight of the industry codes processes, facilitated by a code manager.
The proposals around the creation of a code manager function to replace the more limited administrative role of tradition code governance models is consistent with the way we have set up the REC.
Although we are still in the early days of REC operation, we have already seen evidence of the benefits of this approach and are therefore supportive of similar changes being progressed under other codes.
However, we consider that these improvements can and should be progressed in the near term through relatively straightforward modifications to code and licence. They are not dependent upon the creation of a strategic body or the progression legislation.
We agree with the need for greater strategic coordination of change if the government is to meet its emissions reduction targets. However, much of the necessary framework to achieve that is already in place and that there is little in the proposals that would require or justify further clarity on the governments strategic direction to be delayed pending the progression of further legislation.
The revised proposals also give a strong preference for the role of the strategic body to be fulfilled by Ofgem. We have a number of concerns with this proposal and whether Ofgem as currently constituted could fulfil this role effectively.
We have instead suggested a whole of government approach, with a multifaceted agency being granted temporary delegated authority from whichever of several bodies may ordinarily have responsibilities over a given issue.
For instance, an effective strategy for the wider roll-out of electric vehicle charge points may require collaboration between local authorities, the highways agency and others as well as the energy regulator. Greater coordination may therefore be required at all levels of bureaucracy rather than simply between elements of energy code governance. You can find our full response here.