Source · Select Committees · Business and Trade Committee
Third Report - Energy pricing and the future of the Energy Market
Business and Trade Committee
HC 236
Published 26 July 2022
Recommendations
27
Accepted
Para 118
Ofgem must publish a more robust impact analysis of its proposals for energy suppliers to...
Recommendation
Ofgem must publish a more robust impact analysis of its proposals for energy suppliers to ringfence customer credit balances. We expect the impact analysis to be based on evidence received from suppliers following an information request so that it is …
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Government Response Summary
Ofgem already publishes data on customer debt on a quarterly basis, arising from analysis of data gathered under Social Obligations Reporting.
Department for Business and Trade
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35
Accepted
Para 143
We call on the Government to consider the introduction of a social tariff for the...
Recommendation
We call on the Government to consider the introduction of a social tariff for the most vulnerable customers and a relative tariff for the rest of the market, to be introduced once wholesale energy prices have stabilised. We ask the …
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Government Response Summary
The government states it is already protecting households through the Energy Price Guarantee and other existing policies, and will consider how price protection needs to evolve, with next steps to be set out in due course.
Department for Business and Trade
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40
Accepted
In order to deliver the Government’s target of a zero carbon electricity system by 2035,...
Recommendation
In order to deliver the Government’s target of a zero carbon electricity system by 2035, we further recommend that greater consideration is given to smart tariffs in the revised Energy Retail Market Strategy. Specifically, we ask the Government to consider …
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Government Response Summary
The government indicates industry is making progress on implementation of market-wide half-hourly settlement, which Ofgem believes will be an important enabler of a more flexible, low carbon and low-cost energy system.
Department for Business and Trade
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46
Accepted
Para 187
Ofgem should require energy suppliers to take a pro-consumer approach to payments and debt collections.
Recommendation
Ofgem should require energy suppliers to take a pro-consumer approach to payments and debt collections. We urge Ofgem to take swift and firm action in response to suppliers breaching the Ability To Pay licence conditions and ensure that suppliers promote …
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Government Response Summary
Ofgem has announced four Market Compliance Reviews to drive improvement across the market, including one focused on how suppliers support customers in debt or payment difficulty and is taking enforcement action where necessary.
Department for Business and Trade
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48
Accepted
Para 193
We recommend that the Government develops a scheme to help vulnerable customers accelerate the repayment...
Recommendation
We recommend that the Government develops a scheme to help vulnerable customers accelerate the repayment of debt that has accrued as a result of the energy pricing crisis, for example, by matching the contribution made by customers through the Fuel …
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Government Response Summary
Ofgem publishes data on customer debt on a quarterly basis, arising from analysis of data gathered under Social Obligations Reporting, and intends to publish updated analysis quarterly thereafter.
Department for Business and Trade
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55
Accepted
We reiterate our previous views that the Government should implement urgent, far- reaching, and long-term...
Recommendation
We reiterate our previous views that the Government should implement urgent, far- reaching, and long-term measures to replace the Green Homes Grant scheme that provides the energy efficiency supply chain with confidence of enduring demand and ends the stop-start policy …
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Government Response Summary
The government has committed £6.6bn this Parliament to improve homes to EPC band C by 2030, is consulting on raising Minimum Energy Efficiency Standards for privately rented homes to EPC band C by 2028, and is considering options to deliver £9.2bn to improve energy efficiency across homes, schools and hospitals.
Department for Business and Trade
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59
Accepted
With the worst yet to come, the consequences of the energy price crisis and wider...
Recommendation
With the worst yet to come, the consequences of the energy price crisis and wider cost-of-living crisis on customers, and energy suppliers, is still to be seen. The extent of these challenges cannot be dealt with by BEIS or Ofgem …
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Government Response Summary
The government has taken decisive action to support people and businesses, including the Energy Price Guarantee limiting typical household bills to £2,500 a year for two years, the Energy Bill Relief Scheme providing a discount on wholesale prices for non-domestic customers, and targeted support for vulnerable households.
Department for Business and Trade
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Conclusions (9)
2
Conclusion
Accepted
Para 30
The lack of ongoing requirements for suppliers operating in the market allowed thinly capitalised companies to rely on customers’ money to fuel business growth and operate with either no hedging or inadequate hedging against future energy prices. These companies took substantial risks to undercut responsible suppliers. The new rules put …
Government Response Summary
Ofgem accepts the recommendations of the Oxera report in full, including the development of consumer interest and competition frameworks, and will seek further views from stakeholders.
11
Conclusion
Accepted
Para 62
We expect Ofgem, as the independent regulator, to clearly outline to Ministers and Parliament the risks and consequences associated with the delivery of Government objectives. We do not believe that Ofgem properly raised the risks to Government, or Parliament, that a deregulatory approach to promoting competition could severely undermine the …
Government Response Summary
Ofgem has worked with Government to introduce the Public Interest Business Protection Tax and is committed to working with suppliers and Insolvency Practitioners to ensure current rules and Consumer Protection regulations are adhered to.
16
Conclusion
Accepted
We recognise that this Committee has an important role in the scrutiny of Ofgem’s activity. We expect the regulator to be carrying out its core functions and delivering on its duties. It is neither feasible nor appropriate for Parliament to scrutinise, in real time, all aspects of Ofgem’s decision-making. However, …
Government Response Summary
The government describes the 2021 consultation between Ofgem and BEIS on supplier payment default under the Renewables Obligation, and indicates that Ofgem published a consultation in June this year which included measures to protect money collected to meet Renewables Obligation payments.
26
Conclusion
Accepted
Para 117
Our first priority is to ensure that customer credit balances are protected, so that in the event of a supplier failure, customers are always able to recover the credit 78 Energy pricing and the future of the energy market they have built up. Our second priority is to ensure that …
Government Response Summary
Ofgem has announced four Market Compliance Reviews to drive improvement across the market.
31
Conclusion
Accepted
Para 133
We welcome more frequent calculations of the price cap if this stabilises the supplier market amid current market conditions. However, Ofgem’s cost benefit analysis of its proposed move to quarterly price cap updates did not consider the impact that further price rises in January 2023 could have on vulnerable customers, …
Government Response Summary
The government states that the introduction of the Energy Price Guarantee means there is no longer a risk of prices increasing for consumers in January and Ofgem is reviewing its approach in light of the Energy Price Guarantee and will update the Committee in due course.
33
Conclusion
Accepted
Para 141
The Energy Bill [HL], which was introduced to Parliament on 6 July 2022, included provisions to extend the energy price beyond 2023, but it will not change how the price cap functions. Neither the Government nor Ofgem has undertaken an evaluation of Energy pricing and the future of the energy …
Government Response Summary
The government is introducing the Energy Price Guarantee to protect households from the spiralling costs of energy and will consider how price protection needs to evolve as the energy system changes.
47
Conclusion
Accepted
Para 192
Energy prices are expected to increase to unprecedented levels and the Government’s May 2022 support package will no longer offset the significant increases for households. A considerable number of households will struggle to pay their energy bills and will be at risk of accruing large sums of debt to their …
Government Response Summary
The government outlined actions to support people and businesses with their energy bills and tackle the root causes of the issues in the UK energy market, including the 'Energy Price Guarantee' and targeted support for vulnerable households.
50
Conclusion
Accepted
Para 201
We are concerned by reports that self-disconnection is already at a record high, and this is before the expected, unprecedented rise to the energy price cap this winter. Ofgem only collects partial data on self-disconnection and does not have a sufficient understanding of the risks facing prepayment customers come October.
Government Response Summary
Ofgem introduced a quarterly request for information to gather data from larger domestic suppliers on self-disconnection and Ofgem's view is that it would be preferable to have longer-term data available before making it publicly available.
58
Conclusion
Accepted
Para 220
The impact of the energy price crisis on households is ongoing and severe, particularly in the context of other considerable inflationary pressures, and is likely to cause an unacceptable rise in fuel poverty and hardship this winter. With wholesale Energy pricing and the future of the energy market 83 prices …
Government Response Summary
The government states it has already set out decisive action including the Energy Price Guarantee and other targeted support to address the energy price crisis.