Utility Week

UTILITY Week 27th January 2017

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Page 17 of 31

18 | 27TH JANUARY - 2ND FEBRUARY 2017 | UTILITY WEEK Policy & Regulation This week Energy retail market in 'last chance saloon' Energy suppliers must win the trust of their customers or face radical government action The energy retail market is in a "last chance saloon" and could become "a thing of the past", regulators have warned. Unless the "two-tier" energy system can be ended and customers persuaded they are not being "ripped off " then the government will be forced to take radical action, delegates at Utility Week's Energy Customer Conference were told. "This issue isn't new but it is the issue of the day," said Rachel Fletcher, Ofgem's senior partner for consumers and competition. "The new government has pretty much made it clear that industry is in a last chance saloon and that this issue needs to be addressed urgently." She said the current situation, in which about two-thirds of cus- tomers are stuck on expensive standard variable tariffs, is "not sustainable or politically acceptable". Chair of the Competition and Markets Authority inves- tigation into the energy market, Roger Witcomb, thought the same: "When you see senior politicians saying 'Why should loyal customers have to shop around?' that is actually saying 'Why do we have a competitive market in supply?' Competition requires active customers." Witcomb said the biggest barrier to engaging custom- ers and ending the two-tier market is persuading them they are not being short changed: "There is a feeling that we're being overcharged and you can't trust any of them, so what is the point of engaging?" He said if consumers' trust can not be won there is "a real danger" that the energy retail market will become a thing of the past. TG WATER 'No place' for brokers in the water market Brokers have no place in the open water market, Waterscan has insisted. Neil Pendle, managing direc- tor of the water management company, told Utility Week he did not agree with water retail- ers that the brokering model is a low-cost method of acquiring new customers in the non- domestic water market. "I think they're completely wrong, brokering is not the option for this particular mar- ket," he said. "I don't think it's appropriate, with low margins, that some of that margin goes to a broker. Frankly I'm not sure what value they add." Waterscan is a specialist water management consultancy, that offers commercial custom- ers guidance on reducing their water use. WATER Ofwat wants a quick competition decision Water regulator Ofwat has called for the government to make a swi decision on whether it will proceed with plans to introduce competition into the domestic retail market. At a media briefing in Lon- don, chief executive Cathryn Ross said the regulator hopes a decision is made "soon" because clarity is "really important for everybody in the market". The Treasury announced in November 2015 that it proposed to open the domestic water market as early as 2020. It com- missioned Ofwat to carry out a cost-benefit review, which was published in September 2016, saying the financial benefits could be as high as £3 billion. However, the government has gone quiet on the issue. Rumours are circulating in the water sector that it may be back- ing away from domestic reform. Ross said she did not know whether this would happen. ENERGY Ofgem replaces controversial SMI Ofgem has revealed its Supplier Cost Index, a replacement for the controversial Supply Market Indi- cator that it withdrew in 2015. The regulator has introduced the index in an effort to "provide transparency around energy prices trends" and help custom- ers "understand what is driving their energy bills", Ofgem's chief executive Dermot Nolan said. The new indicator gives a 12-months-ahead view of the cost of energy based on a com- bination of wholesale costs, net- work charges and government environmental and social pro- grammes. These costs represent about 85 per cent of consumer energy bills. (Analysis, p19) Two-thirds of customers are on standard tariffs Political Agenda David Blackman "Nuclear power is to benefit from new sector deals" In Whitehall, when they talk about the grid, they're not talk- ing about pylons. Rather, they will be referring to the tightly drawn schedule of announce- ments with which governments seek to manage the media. The grid this Monday would have had one item on it – the government's industrial strategy. One of the more eye-catching bits of that package was the des- ignation of nuclear power as one of just five industries that will benefit from new sector deals. BEIS' probe into the cost of decarbonisation is a Trojan Horse for fresh efforts to further cut back clean power subsidies. But, in a week when the White House has been occupied by a climate change denier, the continued commitment to tack- ling climate change will raise a cheer in environmental circles. The government has copped flak for wanting to have its cake and eat it over Brexit. Clark's job is to show that such a feat is pos- sible, in energy policy at least. But it was nuclear subma- rines, not power plants, that preoccupied attention as the government's carefully laid plans were blown off course by the Sunday Times scoop about a failed Trident missile test. It's a shame. The cerebral BEIS secretary of state Greg Clark has stitched together a package that looks like a genu- ine attempt to maintain the gov- ernment's legal commitments to a greener future while keeping a lid on businesses' energy costs. Onshore wind is ignored, testament to the sway that the countryside lobby still exercises in the party. And environmen- talists will be on guard in case

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