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It looks like a chance may have finally come for those energy retail chiefs itching to vent their spleen about the first six months of the price cap.
This week, Ofgem in effect issued an open invitation to industry to do just that, as it launched a consultation on its planned “framework” for checking the state of the energy market – the success of structural reforms (such as switching), impacts on customer outcomes and experience, and whether market conditions were now driving “effective competition”.
The process will help form its recommendation to government about the fate of the pricing regime. But after half a year of the divisive policy – pegging default tariffs currently at £1,254 – many suppliers operating under increasingly squeezed margins will find it hard to pass up the chance to point out what it has also meant for their businesses.
Of course, industry views vary widely. Some challenger brands have positively embraced the intervention, undercutting their big six rivals, who have congregated around the cap.
Other players have had more bruising encounters as market share shifted largely from the big six to medium brands. One big six company has gone to judicial review, two more cited it as a key factor behind their failed merger, and some smaller suppliers blame the cap for their final demise.
No-one said it was going to be easy for the regulator charged with implementing the controversial government policy, constantly hampered by fluctuating wholesale prices.
Speaking at Utility Week Live, Ofgem’s Mary Starks said it had been monitoring “first order effects extremely closely”. Yet she also stressed the temporary nature of the policy, set to end under current law by 2023, despite a swathe of consumer support for it to stay – something echoed in Utility Week’s own price cap survey this year.
And therein lies the challenge ahead, ultimately for BEIS and the government, who will have their work cut out reassuring the public when conditions appear right to scrap the cap.
As Starks said: “We will need to think: what kind of regulatory settlement might we need to make sure people still feel prices are fair? We can’t go back to the kind of public mistrust that gave us the cap in the first place.”
Suzanne Heneghan is editor of Utility Week
Contact her at suzanneheneghan@fav-house.com
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