Utility Week

UTILITY WEEK | JULY 2021 | 9 …and what they mean What they said Greg Jackson, chief executive, Octopus Energy: "I'm excited about the future of energy, but I'm not excited about the pace of change and the market structures that disin- centivise innovation." Ed Kamm, chief executive, Shell Energy Retail: "We're the only industry I know that when a supplier fails, the rest of the industry picks up the cost." What it means Sector leaders have set out some of their wishes for the energy retail strategy on p26 and there is a clear desire from industry to be allowed to innovate. Energy retailers will be responsible for taking the energy transition into people's homes but they cannot do this alone. The frameworks surrounding invest- ment and creating the right price signals are the building blocks of a smart energy system. Then there is the relationship with cus- tomers and the crucial issue of trust. This is where the widest divisions between the industry and government are clear. There is frustration across many energy retail- ers that the narrative continues to focus on "rip-off prices" despite the landscape having changed dramatically over the past few years. The auto-switching proposal is a prime example of this – seemingly emerging with little warning to the sector, which has retorted that it is tomorrow's solution for yes- terday's problem. However, even within the industry, there are concerns that not enough has been done to remove the so-called loyalty penalty of existing customers not being offered a sup- plier's best deals. There has been some sup- port for the industry to move towards the financial sector's ban on this practice. What to look out for When approached by Utility Week, the Department for Business, Energy & Indus- trial Strategy said the energy retail strategy would be published "in due course". As we went to press, there were still concerns about the logjam of policy papers relating to the sector and whether they would be published before parliamentary recess on 22 July. Meanwhile, there is still no sign of the consultation on auto-switching that was due in March. Sources tell Utility Week they expect this before recess but do not antici- pate a speedy response from government once opinions have been collated. While debates around future regulation largely focus on the energy sector, Ofwat has also published its initial vision for PR24 (see p15) which details proposed changes to the price control process and a more standard- ised approach to engaging consumers. What they said Dr David Joffe, head of carbon budgets at the CCC: "It would be really helpful for the gov- ernment to have a mechanism to align all their policy to the net-zero target they have signed up to, so something like a net-zero test. To align all policy to net zero would be really important as part of that public engagement strategy, to really show to people that the government are committed to this." Melanie Onn, deputy chief executive, RenewableUK, responding to the CCC report on the Net Zero Strategy: "Delivering on cli- mate change commitments must be put right at the heart of every government department as a matter of urgency. This is a landmark year in what will be a decisive decade in tak- ing action against the biggest threat to our way of life." What this means As Onn points out, the government is now under increasing pressure to show decisive leadership on tackling climate change ahead of COP26 in November. It has shown that it takes the CCC's advice seriously with the passing of the sixth carbon budget. Now the emboldened environmental adviser is push- ing Boris Johnson to use the global stage at COP to commit to tangible change in the next few years. However, as David Blackman points out on p13, there is concern that the Treasury is balking at the cost of Johnson's ambition, leading to faultlines emerging between Num- ber 10 and 11 on how net zero is paid for. What to look out for At the risk of sounding repetitive, it again comes down to the backlog of government policy. In this instance it is the Treasury report which is overdue and with it the cru- cial signals on how taut the purse strings will be in relation to net zero. But it is the government's overarching Net Zero Strategy which is likely to be the most impactful, tying together the various strands of the decarbonisation journey. The worry is that with gasp across all of these component strategies, has the government even begun trying to piece them all together? The energy transition will require a massive investment in new infrastructure but how will it be paid for? What to look out for As Utility Week went to press, electric- ity distribution networks were poised to submit their business plans for 2023-2028. Ofgem's approach to this hugely significant period of investment will be a key test of whether its objectives are aligned with the net zero journey. However, as highlighted above, the regulator is likely to be waiting until the autumn before it receives guid- ance from the government. Meanwhile, water companies will be feeding in their own takes on what the next price control should look like and on Ofwat's role going forward. There is some uncertainty here too in that the regulator currently has an interim chief executive, and a chairman due to step down in Octo- ber. When these two roles are filled on a permanent basis, will their occupants bring with them a different vision for water sector regulation? with the government to provide a direction to Ofgem. Currently this sits in the bulging in-tray for secretary of state Kwasi Kwarteng. With the Lords inquiry taking submissions until August, it does not seem likely this will emerge any time soon.

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