Energy price cap could be ‘very disruptive’

Good Energy expects energy price cap to have “unintended consequences”

The founder of Good Energy has warned a future energy price cap could be “very disruptive”.

Responding to recent reports that ministers are considering a price cap, Juliet Davenport said it could affect her company, but added they will “just have to adapt to dealing with what comes out of that”.

“We think it will be very disruptive, though,” added Davenport. “If you put a simple price cap on the market, there will be a bunch of unintended consequences; are you sure you have the right price? Who decides what the price is?

“We’ve already seen some of these issues come through with pre-payment meters, where we know some of the calculations have not included some of the forward costs. That’s the job of suppliers. They take a forward view of the market and the question is – is the regulator really capable of doing that correctly?”

Speaking last week, prime minister Theresa May said the forthcoming consumer green paper will go beyond just encouraging customers to switch suppliers, as the energy market is “manifestly not working for customers”.

“If you are just offering a price deal, there are some customers who are driven by price, but if you look at the market place you don’t expect it all to behave on price,” added Davenport.

“I don’t think either the government, regulator or switching engines make enough of things like customer service, products or the ethics of businesses. I think there’s a real opportunity to do a much better job of informing the market about who are the players and what they represent.”

Good Energy today (21 March) published its preliminary results for 2016, which show a 41 per cent growth in revenue from £64.3 million in 2015 to £90.4 million last year. Gross profits also increased by 29 per cent over the same time period, from £21.3 million to £27.5 million.

The renewables company has also announced today it is bringing offshore wind into its energy mix for the first time, after securing a deal with Dong Energy to secure 12 per cent of the output of the 210 MW Westermost Rough Wind Farm, which is operated by the Danish firm in the North Sea.

“We always want a balance in terms of where we buy our power from,” insisted Davenport. “The idea is that we are currently buying a percentage of this particular offshore wind site and that has the potential to increase in the future as we grow.”

“We’ve always had a supplier role,” she added. “We partly moved into developing assets ourselves through necessity. A while ago, a lot of the developers would tend to just sell to the big six, so we felt we had to go out there and do our own [projects]. But we think we have gone beyond that now. The market place is moving forward and we’re seeing more innovative players like Dong come in.

“And with the significant cuts to onshore wind and solar in the UK, going out and finding new sites is really tough.

“We have a portfolio of existing sites, which we will continue to work on, but we think partnership is the way forward, where we have people who have better economies of scale, both in terms of purchasing power and cost of capital.”