Letter from the Editor: It’s up to BEIS to level the playing field

The draft price cap bill has been shoed forward for approval in parliament by the BEIS select committee, taking it one step closer to becoming a reality by next Christmas. The committee’s pre-legislative scrutiny of the bill broadly backed its ambitions, only putting forward minor recommendations for alterations to the wording to minimise the justification for industry appeals.

It correctly identified that including increased switching as a cap objective was unlikely to meet with success and and advocated, therefore, a less ambiguous focus on eliminating overcharging. Meanwhile, difficult questions around what exactly is meant by “effective competition” have been batted back into Ofgem’s court.
These outcomes will come as little surprise to industry, though there will be feelings of disappointment with the BEIS committee on two key accounts.

First, its outright refusal to consider industry pleas for the CMA to be included as a route for appeals. And second – and perhaps more importantly in the long run – its decision to ignore submissions from suppliers calling for inequalities in supplier obligations to be addressed as part of the cap implementation process.

There’s a growing swell of dissatisfaction among retailers – not just big six but mid-sized and small suppliers too – at the continuation of these loopholes, which were introduced to catalyse the creation of a more dynamic and diverse energy market.

Many represented their views to the select committee that exemptions for smaller suppliers from obligations like Eco and Warm Homes Discount payments have had their day, saying they allow smaller suppliers unreasonable means for undercutting the prices of larger rivals and thereby perpetuate consumer misinformation about the real cost of energy supply.

Furthermore, since over two million savvy shoppers have now switched to small suppliers, customers remaining with larger brands – who the CMA told us are more likely to be disengaged, vulnerable customers – are picking up an increasing part of the policy cost tab.

If unaddressed, these market inequalities would be enshrined by a price cap. But the select committee wasn’t keen to grasp the nettle. It has urged Ofgem to be more trigger happy in using its powers to intervene in the market in the interests of customers, and perhaps it hopes the regulator will also be proactive here.
But Ofgem’s position is easy to anticipate. Policy costs and the structures via which they are applied are policy issues – return the ball to BEIS’s court.