Utility Week

UTILITY WEEK | 23RD FEBRUARY - 1ST MARCH 2018 | 13 Policy & Regulation But whether he, and the energy industry more broadly, likes it or not, the committee's backing for the bill's overall thrust enhances its chances of receiving a fair wind in the House of Commons. The committee wants the bill to be tabled in parliament as soon as possible to ensure that the cap can be introduced by next winter. Yeo thinks this timetable will require some fancy parliamentary footwork but is doable. "It depends on the priority they are willing to give it – if they are prepared to allow it to jump the queue. The problem at the moment is that everything is skewed by Brexit, which is taking all the energy in Whitehall and the timetable in parliament, but if they are willing to do it, it is possible." The big six should have got their house in order long ago – it's high time the government acts to make sure rip-off SVTs go and stay gone. E nergy is a special and essential service. For this reason, the operation of energy markets is held to high standards. But the energy market today is broken and millions of people are penalised for the crime of staying loyal to their energy provider. In the Business, Energy and Industrial Strategy Committee's inquiry examining the government's dra legislation for an energy price cap bill, we found competition in the domestic energy market is not working effectively for 12 million customers stuck on standard variable and default tariffs. The reality is that this market has been dysfunctional for years and it has become two-tiered, with some consumers facing paying up to £300 more than others each year. Customer loyalty should be rewarded by energy suppliers, not exploited. Currently too many energy suppliers rely on a business model where they target cheap acquisition deals at engaged customers who switch, while making substantial profits from "sticky" customers on expensive variable tariffs who do not or rarely switch. Regardless of customers' reasons or obstacles to switching suppliers, no customer should be penalised disproportionately for not engaging with competition. Nor should they constantly be required to defend themselves against excessive charges. Where markets fail to deliver fair outcomes, intervention is justified. When the government published in October 2017 the dra Domestic Gas and Electricity (Tariff Cap) Bill, in which it set out its plan to introduce a temporary absolute price cap on standard variable and default tariffs, we heard predictable wailing from the big six energy companies about the damage this would inflict on the market. If only the big six had taken some of the repeated warnings from the government seriously enough to initiate meaningful measures to stop their customers getting ripped off, then this intervention might have been avoided. But the fact is those retailers who were found by the Competition and Markets Authority to be operating inefficiently and passing excess costs on to standard variable and default tariff customers have brought this intervention upon themselves. The BEIS committee's hope is they start treating their loyal customers more fairly in the future. The BEIS committee agrees with the government that an absolute price cap – and not a relative price cap – will be the most effective measure at delivering the bill's key goals: improving fairness and reducing the overcharging of standard variable and default tariff customers. Ofgem needs to up its game too. In the past, Ofgem has been too slow and too reluctant to use its powers to step in and protect the interests of customers, especially vulnerable customers. We have called on Ofgem to be much faster and more proactive in using its extensive powers to protect consumers from overcharging in the future. Once the cap is lied, this cannot be a green light for suppliers to return to bad habits. Our report recommends the government and Ofgem should take any necessary measures to ensure that the elimination of overcharging remains in place in the long term and that suppliers are not able to go back to their overcharging and cross- subsidising practices. An energy price cap is now necessary and a commitment to introducing a cap was in both Conservative and Labour manifestos at the last election. The government must now act urgently to ensure this cap in place to protect customers next winter. Comment Rachel Reeves MP Chair of the BEIS Committee and Labour MP for Leeds West No right of appeal The government has set a "dangerous precedent" by preventing suppliers from being allowed to appeal to the Competition and Markets Authority (CMA) against Ofgem's rulings on price cap levels, Energy UK has warned. Under the legislation, only judicial review is le open for suppliers hoping to overturn a decision. The BEIS committee said that allowing a right of appeal to the CMA would "unnecessarily delay further the successful implementation of the cap". Lawrence Slade, chief executive of Energy UK, tells Utility Week he is "disappointed" at the government's stance, which was out of line with the CMA's powers surrounding other utility price control decisions. He says: "It sets a dangerous precedent if such decisions are no longer subject to challenge on their substance. It risks more arbitrary interventions in future and creates uncertainty that could spread to other sectors and companies. "We hope that when it takes forward the legislation, the government recognises that, as the expert body long established for this purpose, the CMA would represent a consistent approach and is also a more appropriate and effective way of reviewing these types of decision than judicial review." The committee also expressed concerns about the level of profits being made by network operators. It said it would "monitor closely" the next phase of the RIIO, hinting that it may investigate this area in the future. The committee is right to put pressure on the network operators, said Yeo: "We should be getting Ofgem to crack down much more on transmission and distribution costs."

• Cover