Utility Week

UTILITY WEEK | 1ST - 7TH NOVEMBER 2019 | 13 Policy & Regulation "It is about striking the balance about not making it prohibitively difficult to enter this market, but trying to bring down the cost of mutualisation." MARY STARKS, EXECUTIVE DIRECTOR OF CONSUMERS AND MARKETS, OFGEM of how the mutualisation process is run, has other ideas. She says: "The only reason people don't make payments on time under the Renewables Obligation is because they are either playing the market or they are incompetent. "Hopefully, the new stricter guidelines on market entry should include a competence criteria, removing that risk; and the threat of monthly payments should be enough to deter those who are playing the system. "Companies like Good Energy who have complied with the Renewables Obligation on time, year a er year for over ten years, should not be penalised for the unethical or incompetent behaviour of other suppliers." She has a fair point: it is not hard to see why suppliers who pay what they owe and are in effect punished for the failures of oth- ers, may feel aggrieved. One solution being proposed by Ofgem chief executive Dermot Nolan is to introduce monthly obligation payments. Speaking at the Utility Week Congress in early October, he said: "There are elements of the supplier of last resort process, the way obligations are issued and collected, that have given some firms the licence to be, shall we say, a little too venture-some in their activities. "We are closing such gaps and I am con- scious that some of the failures that have not been optimal and have been facilitated by firms that took too risky a strategy with their consumers' funds." To this end, Nolan has written to the Department for Business, Energy and Indus- trial Strategy (BEIS) asking if it might change the legislative framework to ensure pay- ments are "perhaps quarterly but ideally every month", as happens with capacity auc- tions. BEIS is yet to respond to Utility Week's request for comment. Financial pressure While monthly payments may go some way towards alleviating the pressure faced by suppliers and consumers, the reopening of the Capacity Market may prove another heavy blow to the challengers. Following a landmark ruling by the Euro- pean Commission, suppliers will have to resume their payments, including those for the past year. This will place added pressure on suppli- ers with tight budgets, especially those that have not put capacity payments aside during the market's suspension. That said, if com- panies have not put the money aside, they have only themselves to blame. Financial health checks are being pro- posed as a way of keeping an eye on chal- lenger brands growing too big, too quickly. Checks would be introduced for growing suppliers before they hit certain thresholds of customer numbers, requiring them to ensure they have the operational capability to serve their customers effectively. If they failed the checks, they would be prevented from taking on further customers. The proposed rules appear to have had a positive impact thus far, with industry voices such as Citizens Advice and the Energy Ombudsman welcoming them. Yet there seems to be a long way to go before regula- tion is where the industry wants it to be. One thing is certain: the issues that plagued Toto Energy will also be troubling others and its exit from the market is unlikely to be the last we see in 2019. Adam John, reporter

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