Utility Week

UTILITY WEEK | FEBRUARY 2022 | 15 Energy retail tions are now so high for action on climate change that even grand nancial commit- ments are met with little more than a shrug. "The negative reaction to COP for me was really positive. Because it wasn't a question of why are we doing all this stu• , it was in the sense of 'this doesn't go far enough'. "The government will ultimately follow public opinion, so if the public is setting the bar higher, you can have an expectation that legislation will follow." Despite the general positivity about the impact of COP, one participant felt the debate was still too heavily focused on legislation as opposed to personal responsibility. The executive at a prominent challenger brand said: "There was still a sense from COP that it's someone else's job to x this. I don't think the message really landed about the role of individuals in all this." State of mind So, how do we land this message, and what is the role of energy suppliers in reinforcing†it? One view was: "We have the power to make a di• erence in areas where govern- ments may not make the move. From elec- tric vehicles to heat pumps, we can drive the change and we don't necessarily have to wait for governments. "An area where we can take some con dence is that the generation of bill- payers coming through is the most climate- conscious and socially responsible we have ever seen. We have a golden opportunity in in association with Comment Simon Ede, Vice president, energy practice, CharlesRiver Associates F or some, the retail market meltdown might seem like an unfortunate distrac- tion a‹ er the very substantial amount of people's focus and attention given to COP26. This discussion, however, revealed something quite di• erent and more exciting. The retail market crisis is, in fact, drawing out the challenge on how to manage the cost of the energy transition and the implications that has for the ways and means of how the market works. We ought to be witnessing the death throes of a market model that, in the end, satis ed no-one. What we heard from the discussion's participants, and we agree with, is that beyond avoiding a collective nancial disaster for both consumers and suppliers, 2022 ought to be the beginning of a conversation about how best to reorganise the industry, and how best to rede ne the customer, for the net-zero challenge. In particular, 2022 ought to be about how our industry competes for the right to help shi‹ long-ingrained mobility and household energy consumption choices, in ways that other industries have already done. This is going to require a new set of expectations around how rms compete with each other front of us. But to make the most of it, we need to show customers we are their allies." On the subject of how to conduct this all- important conversation with the consumer, a representative of one of the country's largest retailers insisted that "we should be unashamed of showing people where the value†lies". They continued: "We talk about the home, not the heat pump. The home is the asset, and that creates value. It can earn you money and you can sell or rent it. These are the value propositions that people actually talk about." More pain ahead While the conversation about the opportuni- ties presented by net zero was a continually positive one, a pall settled on the conversa- tion when it was brought back to the short- term landscape for consumer nances and the inevitable pain that will come with the next price cap rise. As one participant put it: "It comes back to April. There has to be some solution around how do we think of this in a di• er- ent way? We have a responsibility to our consumers to ease the pressure now. How do you do that when you're also talking about this extra outlay that is going to come with net zero? There is a real risk that the cost of living debate erodes appetite for net zero." Those present at the dinner and who spoke to Utility Week following it said the industry had presented multiple solutions to "2022 is the year to answer diffi cult questions" as much as what products and services they choose to sell. The historical focus on switching is going to be less useful in gauging how e• ective the market is when dealing with competition for products and services relating to mobility, decentralised generation and storage, and smart homes. Moving beyond delivering and billing for a commodity, utilities will need to engage customers around this broader concept of end-use energy assets and services. This year's conversation needs to be around how utilities, regulators and other industry stake- holders are going to work together e• ectively towards delivering net-zero households. As part of this conversation, it will be important to reconcile the roles of companies, consum- ers, local authorities and regulators on how to ensure that net-zero transitions are accessible beyond comfortable middle-class households with capital to deploy. Where private companies have a role in delivering against public policy objectives, they will require some form of incentive. the government and the regulator to ease the pressure on consumers. These included scrapping VAT on energy bills or moving green levies into general taxation, as well as using private nance to smooth out the impact of Supplier of last Resort payments (which Ofgem is consider- ing). "Taking green levies into taxation is an obvious, measurable impact on customers' bills," one sector leader insisted. "Even if we can get it in there on a temporary basis – there have been lots of things that started out as temporary that have stuck around. It's about getting it on the table and then work- ing from there." While there was clear support in the room for nancial support from government, there was an acceptance that there would be polit- ical pressure against it. One participant said: "They're fearful of being seen to give handouts, or it being presented as such. How do we get the mes- sage across that we're not asking to be bailed out. We're asking for help to smooth out the impact on customers. If the government can step in now then the impact on bills can be spread over a much longer timeframe. "I understand the sensitivity but where are the alternatives? At the moment we are sleepwalking into a cost of living crisis. The price cap wasn't designed to cope with this and to constantly repeat that it will protect people will be of no use in April." James Wallin, editor

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