Utility Week

UTILITY Week 18th November 2016

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The Topic: Competition COMPETITION THE TOPIC 10 | 18TH - 24TH NOVEMBER 2016 | UTILITY WEEK C ompetition in the energy sector has been around for two decades, starting with deregulation for the gas sector in 1996 and followed two years later by the electricity industry. Since then, some critics claim, the large incumbent suppliers, the "big six", have dominated the market. As recently as 2010 they had a 99 per cent market share. With this dominance have come accusa- tions of foul play, profiteering, and taking advantage of disengaged customers, 75 per cent of whom have never switched energy supplier. Indeed, the two-year investigation into the energy market by the Competition and Markets Authority (CMA) stated that energy customers have been overcharged Energy: a market still needing a fix Energy has been competitive for two decades but still the arguments continue about how competitive it truly is, or whether it's effectively a stitch-up by the big six suppliers. DIFFERENCE BETWEEN CHEAPEST AND STANDARD TARIFFS £1,200 £1,150 £1,100 £1,050 £1,000 £950 £800 £850 £700 Cheapest Big six average Jan 14 Mar 14 May 14 Jul 14 Sep 14 Nov 14 Jan 15 Mar 15 May 15 Jul 15 Sep 15 Nov 15 Jan 16 Mar 16 May 16 Jul 16 Sep 16 programme. The biggest call is for everyone to take a pragmatic approach to this. It's obvious how important it is to the future of the industry and its clear we need to get this done, but let's be sensible about this. Q: Are multi-utility offerings and bundled services the next logical step in terms of competition? A: There are several providers already pro- viding broadband, telecoms, electricity and gas and I see no reason why you wouldn't expect that to expand. There will be companies out there saying, we've got these big costs we're carrying, we're investing heavily in systems and cus- tomer service, what can we do to leverage that and maximise our return there? There are lots of opportunities out there. Market changes will help, as will technology. Q: One of the key pillars to help boost competition in the energy sector is the rollout of smart meters. How do you view the delay to the DCC go-live? A: The industry was obviously disappointed by the delay and at this stage of proceedings delays don't help. We've got to be very sensi- ble about this now. It's not a case of picking fights, we've got to understand how we get to and over the next hurdle. There is no getting away from the fact that the next two quarters are critical to the "This is the last chance saloon for the energy industry. After a two-year inquiry, the energy companies now must prove they are taking action to genuinely engage with their customers stuck on the worst deals. The government and the regulator must be ready to act if energy companies fail to deliver." • Alex Neill,Which? managing director of home and legal services by £1.7 billion a year – a figure the suppliers contest. To "fix" the market, the CMA has come up with a number of remedies (see box, right), which Ofgem has been tasked with delivering, in order to encourage customer engagement and reduce that dominance. These include introducing a price cap for prepayment customers, who are oen peo- ple in the most vulnerable circumstances, until "at least 2020", and the introduction of a database of customers who have not switched for at least three years, which will be open to other retailers to contact. Questions have been raised about the effectiveness of the remedies, and whether they go far enough. Some politicians and key industry figures – including CMA panel source: www.TheEnergyShop.com "The sludge market seems to us – and indeed to some of the companies who are at the cutting edge of sludge treatment – to have real potential for value creation." • Cathryn Ross, Ofwat chief executive Q&A Lawrence Slade, chief executive Energy UK

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