Publications

There have been a number of industry consultations in recent weeks that will impact the retail market.

Part of RECCo’s role involves providing knowledge and expert opinion on retail energy issues to support our mission of facilitating the efficient and effective running of the retail energy market.

RECCo responds to relevant industry consultations to help shape the direction of the retail market. This section of the newsletter provides a high-level overview of our recent responses led by our Strategy and Development team. Ofgem consultationsSuite of market resilience consultationsThe unprecedented number of supplier failures in recent times prompted a number of reviews and proposed interventions by Ofgem. Ofgem’s early thinking was set out in an open letter and a number of consultations pertaining to the default tariff. RECCo provided an update on these publications in the December RECCo newsletter. You can see a full list of our consultations and responses here.Given the scale of the issues, Ofgem continues to develop its approach and is currently running several consultations on measures to build resilience in the retail energy market. We have now also responded to these consultations.We will continue to engage with Ofgem on its market resilience work, and will update REC Parties via our newsletter.DCC – Price control consultationOfgem also published its consultation on the DCC price control for the regulatory year 2020/21.RECCo will, in due course, assume the responsibility for overseeing and funding the DCC in its role as the Central Switching Service provider. Our response (which is available on our website) focused on the aspects of the consultation relating to the Switching Programme and the transition from programme to operational governance.Switching Programme – Ofgem statutory consultation on Licence modificationsRECCo responded to Ofgem’s consultation on the proposed changes to the Electricity Supply Standard Licence Conditions and the Gas Supply Standard Licence Conditions published in December 2021.In our response we outlined that we are largely supportive of the proposed changes. There were some areas which specifically called out potential actions for the Performance Assurance Board, including the monitoring of:

Suppliers’ adherence to the 5 working day SLA for switching;

Use of the annulments process; and,

Use of the erroneous transfer flag.

The consultation also highlighted the value stakeholders had found in the Consumer Journey Forum. We also recognise the value in such stakeholder engagement and are considering how best to maintain this once we transition from a programme to operation environment. BEIS ConsultationsBEIS - suite of off-gas grid low carbon heat pump consultations. As part of the Heat and Building Strategy, BEIS published a suite of consultations focused on off gas grid transition to low carbon heating.In our response to the suite of consultations, we outlined that RECCo is supportive of the transition to low-carbon heating alternatives and agrees that decarbonisation is central to the challenge of achieving net zero ambitions.A targeted approach to off gas grid buildings with a general market-based mechanism could provide the breadth of incentives and encouragement needed to drive heat pump uptake.However, these are not new technologies, and are already in widespread use in other markets; we therefore question whether the volumes expected to be supported by the proposed government grants would deliver the scale necessary to substantively reduce unit costs and make these heat pumps viable for the majority of consumers.We believe using a market-based mechanism to drive the uptake of low-carbon heat, relies on placing obligations on participants like manufacturers which have not traditionally been exposed to regulatory monitoring of sales or roll-out targets. This cultural shift may be a challenge, especially in the timescales envisaged. BEIS - Future of the energy retail market: call for evidenceIn July 2021, BEIS published its energy retail market strategy for the 2020s which set out its vision on the market enabling net zero.Following recent supplier failures, BEIS has issued a further consultation, ‘the Future of the energy retail market: call for evidence’, seeking to understand the impact of events on how future government policy can best achieve the vision it set out earlier this year.In RECCo’s response to the consultation, we outlined that whilst supportive of the general consideration, we are concerned that the breadth of the questions in the consultation were too expansive to illicit sufficiently informed views and evidence.We also outlined that there is a risk that the current retail market developments have prompted a review into the retail energy market, but that the review did not consider or identify the wider, holistic issues that need to be addressed.We therefore provided support for an exploratory phase that seeks to better understand the issues and challenges across the energy sector before embarking on the development of further strategies in the retail energy market. Our full response will be on our website following submission shortly.Citizen Advice ConsultationCitizens Advice – Draft Consumer Work Plan 2022/23The Citizens Advice draft Work Plan was published for consultation on 20th January 2022, inviting comments by 15th February 2022. We were delighted to see the number of initiatives across four workstreams, that focus not only on the current energy market volatility but also cover more robust provisions for all future consumers.In our response, we observe many synergies and opportunities to collaborate with Citizens Advice in meeting these ambitions. Our full response can be found on our website.

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Industry Snippets

On 4th February 2022, Ofgem published seven price cap decision documents, a guidance document around risk management practices, and a decision on market resilience.This was in addition to two consultations on the price cap methodology and guidance on applying for a gas or electricity supply licence. The scope of these publications gravitates around the price cap and market resilience given the context of the increase in the default tariff cap, announced on 3rd February 2022, which is due to come into effect on 1st April 2022.As part of the discussion on the increase of the default tariff cap, the BEIS cross-party Committee held a session (see here) to support its work in assessing the operation of the energy price cap and the impact it has on household energy bills.This session is part of the Committee’s new inquiry into energy pricing and the future of the energy market.Other industry insights include:

The Governments Levelling Up White Paper has been published which sets out a plan with 12 national missions, including shifting power to local leaders, funding available to some local areas for energy efficiency/saving measures, and providing public investment in R&D.

BEIS has announced funding for energy efficiency upgrades for 20,000 social housing properties with EPC rating D or lower across England.

National Grid ESO has changed the name of the ‘Steady Progression’ Future Energy Scenario, which it uses for future scenario planning, to ‘Falling Short’. This was in response to feedback that it wasn’t sufficiently clear from the old name that this scenario did not meet the Net Zero target.

BEIS has announced that, from March 2023, allocation rounds for Contracts for Difference (CfDs) for the new renewable generation will be every year, instead of every two years.

As per Energy UK’s latest switching figures, the number of customers changing to a new supplier remained low in December 2021. 172,408 customers switched, representing a 63% decrease compared to the same period last year.