BEIS eyes SOLR reforms

Kwasi Kwarteng has hinted that the government will update its supplier of last resort (SoLR) process in response to the spate of energy retailer collapses seen in recent weeks.

Following his statement to the House of Commons this afternoon (20 September) on the UK gas market, the secretary of state for business and energy was pressed on whether the fixed-term deals that customers have negotiated with their current supplier will always be respected when they are transferred from one supplier to another under the SoLR process.

Kwarteng told MPs that an updated version of the process may be appearing “in the light of the threats posed to a number of suppliers” when the Department for Business, Energy and Industrial Strategy and Ofgem publish their joint statement in response to the current crisis triggered by spiralling gas wholesale prices.

However, when the statement was eventually published at midnight, there was no explicit reference to SOLR.

Speaking in the Commons, the secretary of state had downplayed fears about rising gas prices, dismissing worries about interruption to power supplies as “alarmist, unhelpful and completely misguided”.

He said that four suppliers had exited the energy market in recent weeks and more may be expected to do so in coming weeks.

But companies “often” exit the market at around this time of year ahead of having to make renewables obligation certificate payments, Kwarteng said: “It is not unusual for smaller energy suppliers to exit the market, particularly when wholesale global prices are rising. The sector has seen regular entry and exit in the last five to 10 years; indeed, that is a feature of a highly competitive market.

“The current global situation may see more suppliers than usual exiting the market, but that should not be any cause for alarm or panic. We have clear processes in place to ensure that all customers are supplied with energy.”

He also ruled out government bailouts for failed energy suppliers.

“There will be no rewards for failure or mismanagement. The taxpayer should not be expected to prop up companies who have poor business models and are not resilient to fluctuations in price.

“We must ensure that the energy market does not pay the price for the poor practices of a minority of companies and that the market maintains the competition that is a feature of the current system. We must not simply return to the cosy oligopoly of years past where a few large suppliers simply dictated conditions and pricing to customers.”

And the minister insisted that the energy price cap is staying in place

However shadow business energy and industry secretary Ed Miliband branded Kwarteng’s statement as “much too complacent on the price and economic impacts of the current situation”.

Citing the decision in 2017 to allow the closure of the Rough facility, which provided 75 per cent of the UK’s gas storage at the time, he said the country must “learn longer-term lessons from this crisis about the lack of resilience in our energy system that has contributed to very large price spikes”.

Utility Week has launched its Energy Reset campaign, in a bid to ensure the current crisis results in real reform of the energy retail market.