Utility Week

UTILITY WEEK | 8TH - 14TH MARCH 2019 | 15 Policy & Regulation precisely what the impact could be, but in broader terms we know Brexit introduces a lot of uncertainty, and with the foreign players in particular in the UK market, who knows what impact any sort of Brexit might have – whether it's a so Brexit, hard Brexit or whatever." Hawkins agrees that the uncertainty brought about by Brexit is having an effect on utilities, but only to a certain extent. "With regard to the electricity sector, there's only one company that's really directly affected and that's National Grid. They've got some really quite big investments on Euro- pean connections, both to France and Hol- land and elsewhere." However, the effect of Brexit is "nothing" compared with the outcome of the regulatory review in 2021, which will be "absolutely piv- otal" in National Grid's share price going for- ward, he suggests. "For National Grid, that transcends what may or may not happen with Brexit." Price cap The energy price cap, brought in by Ofgem on 1 January, has been a challenge for retail- ers large and small. "The introduction of the price cap is a bit of a blunt instrument, and in the context of the recent price rises, it does introduce complexities," says Siggins. All six of the largest energy companies have increased the price of their standard variable tariffs by at least 10 per cent this year. Eon was the first to announce a rise in line with the new level of the price cap on 11 January, closely followed by EDF, which raised its prices on 12 January, Npower on 13 January, British Gas and Scottish Power on 19 February, and SSE on 21 February. Co-op Energy and Ebico have both also announced price hikes of at least 10 per cent. Siggins suggests the introduction of the cap is likely to have some "unintended con- sequences" in terms of how the competitive market works. "For the smaller retail players, it does mean there are implications in terms of hedging strategies. When you look at the make-up of the retail price offsetting in terms of looking at operating costs there's not much to be had there, so it is going to con- tinue to create difficulties." However, he adds, in this area the behaviour of the regulator will be "really important". "We've already seen they've announced an increase in the price cap. Maybe there is a forecast it will come back down, but I think it's a case of how the regu- lator operates in tandem with the wholesale market to make sure there's a fair deal for customers, but also that they're not putting ENERGY MARKET VITAL STATISTICS continued overleaf PROPORTION OF CUSTOMER ACCOUNTS ON DEFAULT TARIFFS Source: Ofgem NUMBER OF SUPPLIERS IN THE ENERGY MARKET Source: Ofgem MOVEMENT BETWEEN SMALLER AND LARGER SUPPLIERS Source: Energy UK SSE Dec 13 Dec 16 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Jun 17 Jul 17 Aug 17 Sep 17 Oct 17 Nov 17 Dec 17 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18 Dec 17 Dec 16 Dec 15 Dec 14 Jun 14 Jun 18 Jun 17 Jun 16 Jun 15 80 60 40 20 0 300,000 250,000 200,000 150,000 100,000 50,000 0 British Gas Eon EDF Energy Npower Scottish Power Others All suppliers 55% 51% 45% 45% 39% 54% 69% 64% Number of suppliers with market share below 1% Number of suppliers with market share between 1-5% Number of suppliers with market share above 5% Larger to smaller Smaller to larger Larger to larger Smaller to smaller

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