Utility Week

UTILITY Week 22nd May 2015

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12 | 28TH MAY 2015 | UTILITY WEEK Policy & Regulation Analysis N ew entrants are steadily gaining a foothold in an arena traditionally dominated by a handful of behe- moths: the energy market. And with them they are bringing new ways of doing things, whether it is "disruptive technology" in gen- eration or distribution, or alternative ways of bundling and selling energy in the sup- ply market. Their existence may require a rethinking in the way market rules work. Ofgem has recognised this and this week closed a consultation on how the regulatory framework may have to change to accom- modate non-traditional business mod- els (NTBMs). This wave of innovation is a trend only expected to continue as more businesses spot a niche for themselves in addressing the low carbon transition or the lack of consumer engagement and trust that Ofgem believes is behind the movement. These new players are able to take advan- tage of rapid technological innovation faster than the big six, and Ofgem does not plan to stifle such potentially beneficial change. Chief executive Dermot Nolan said in the consultation: "I want us to get out of the way where regulation poses barriers, and to sup- port innovation where the benefits are clear." Ofgem says the consultation is the start of a much-needed longer discussion on the benefits and risks to consumers these NTBMs could pose, and is quick to point out its "firm view" that this kind of innovation is important. However, with the Competition and Mar- kets Authority Investigation drawing to a close and the preliminary results expected in June, is it a case of the regulator merely jumping before it is pushed? Nolan says the purpose of the consulta- tion is to "improve our understanding of what is on the horizon so that we can stay ahead of the curve as an agile and respon- sive regulator", highlighting an awareness that current regulation may no longer be fit for purpose, and a willingness to adapt before the CMA potentially questions its role. How regulation will change is unclear, Ofgem says the very nature of NTBMs mean they are not easy to define or categorise. The banner "NTBM" encompasses publicly- owned organisations, community schemes, niche not-for-profit suppliers, multi-service organisations, peer-to-peer supply and pro- sumers, all with different aims and ways of operating that will be a challenge for anybody to manage within one regulatory framework. However, it is not just new entrants that are no longer resembling the accepted model of supplier, even the old players are starting to evolve. With business in the energy mar- ket tightly controlled through the Retail Mar- ket Review, even the major players appear to be trying something new. It is just they are looking outside the energy market to do it. In April, big six energy supplier SSE's orangutan started advertising broadband. While new to its advertising campaign, the company says the move into telecoms is not a recent one. It has offered broadband and telecoms for almost ten years, but the recent advertising push is part of a larger strategic move to become a one-stop provider of all home essential products. SSE acknowledges it has upped its game recently and is "looking to make inroads, build market share, and show customers that we have a highly, highly competitive and reliable product to offer them" a spokesper- son for SSE tells Utility Week. It has backed up this intention by launch- ing a broadband deal, open to both existing and new gas and electricity customers, that went straight in as the top deal on money- supermarket.com. SSE does not plan to stop there. With a full range of home services such as boiler, electricity and gas installation and maintenance, SSE is in the process of evolving into a business model very different from the simplistic energy supplier. Maybe the challenge for Ofgem is not pro- ducing a future regulatory framework that incorporates NTBMs among traditional mod- els, but is instead producing one without any traditional business models at all. Ofgem means business The energy market is having to cope with so many non-traditional business models that the regulatory framework may have to change to accommodate them. Lucinda Dann reports. Four NTBMs Utility Warehouse Independent supplier Utility Warehouse has separated itself from fellow competitors by offering a bundled service. Customers can receive broadband, phone and energy from the company, and customers are rewarded for receiving more services. Woodland Trust Energy Woodland Trust Energy is a partnership between one of the larger independent suppliers, Ovo Energy, and the UK's leading woodland conservation charity the Woodland Trust. By receiving their electricity from the company, customers also support a major UK charity. For every new customer that switches to Woodland Trust Energy, Ovo makes a donation to the Woodland Trust so that it can continue its conservation work. Piclo Piclo is an ongoing 16-month trial of an innovative trading service with Good Energy. Backed by The Department of Energy and Climate Change, this peer-to-peer trading platform allows renewable generators to sell their electricity directly to local commercial consumers. The service is being overseen by independent supplier Good Energy to ensure all regulatory requirements are met and to provide billing. The trial aims to prove the feasibility of a peer-to-peer trading engine and partnership model of this kind. It also intends to prove that the service is able to deliver value to renewable generators and savings to consumers. Ebico A not-for-profit energy company, Ebico offers just one tariff for gas and one for electricity to all its customers regardless of their payment method, with no tie-ins or cancellation fees. As a registered social enterprise Ebico is free to pursue its social and environmental goals with revenue just required to cover costs. It holds over 30 contracts with housing associations as Ebico's main focus is reducing fuel poverty. To that end all surplus profits go to The Ebico Trust for Sustainable Development to improve energy efficiency in poor households.

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