Utility Week

UTILITY WEEK | JUNE 2022 | 21 Talking Points… "It is either having our children freeze in a classroom but being taught by a teacher, or a warm school where children can concentrate on learning but they lose that crucial classroom teacher. That is the stark reality." Dame Meg Hillier on the impact of rising energy bills "In too many cases, we still see elementary failings in companies getting the basics right. There were over 100,000 customer complaints about poor service from water companies last year and this number is rising not falling." Ofwat chief executive David Black "The biggest gap [in the Energy Security Strategy] is on the demand side where there has been much less attention to material policies around energy efficiency." Former Bank of England governor Mark Carney Quote, unquote The news in numbers: £30bn Potential savings by 2035 if locational electricity pricing is introduced, according to a study from Energy Systems Catapult and Octopus Energy. 20m Milestone number of smart meters connected to the Data and Communications Company's national grid, reached at the beginning of May. 10% Proportion of customers who intend to ask their energy supplier to return some of their credit balance, according to a survey by Uswitch. £120m The amount up for grabs in the Future Nuclear Enabling Fund, which was launched in May. It's time to look beyond the price cap The latest act in the tragedy that is the energy crisis has seen Ofgem push forward with plans to imple- ment a quarterly price cap as part of its response to soaring wholesale costs (see Review, p6). This minded-to position would make it seem that a bit of tinkering with an existing solution will address the problem. It further adds to the worry that the regulator in 2022 is fixated on addressing the issues of 2018 – a market focused on switching and bargain- basement deals. Yet these are unprecedented times and as such, they require unprecedented solutions. The conversation must not be what tools we do have, but what tools we could have. There are a number of options Ofgem and the government could pursue instead of fixating on the price cap. More radical reform, such as introducing a relative cap, should be prioritised. One model previously proposed by MP John Penrose would set a maximum mark-up between a supplier's best price and their default tariff. Introducing social tariffs as a more tar- geted measure is another solution favoured by top industry officials (see p29). These would reduce the bills of those in fuel pov- erty or otherwise vulnerable. Elsewhere it is well known that much of the UK's housing stock is in dire need of bet- ter energy efficiency. Government should as a matter of course invest more into upgrad- ing domestic properties – a move that can tackle the dual issues of fuel poverty and the climate crisis. The future energy mar- ket will be one of increased renewable power, one where consumers will have incen- tives to pursue cheaper, greener energy. If we are to achieve this future of more dynamic pricing, the regulator must look beyond the cap towards how customers use energy. For its part, Ofgem argues that a quar- terly cap will allow suppliers to more accu- rately predict how much energy they need to purchase, reducing the risk of further supplier failures. Additionally, customers benefit much sooner when prices fall. Yet within hours of the announcement, grave concerns were raised about what hap- pens when prices increase further. National Energy Action warned that the move "opens the door to significant price rises" over the coming winter. The price cap has protected customers from the high costs of energy, especially in the first months of the crisis prior to the 1 April increase. Yet it was doing something it was never intended to do – keeping prices artificially low. Going forward, Ofgem's focus must be on the types of business models that emerge and how to regulate them while offering consumer protections in a new market. Failure to do so is likely to result in more consumer woe. Adam John, senior reporter Comment: The government has presented utilities with an extravagant shopping list, but not the means to pay for it.

• Cover