Network charge deferrals must not give ‘unfair advantage’ to ailing suppliers

Energy UK’s interim chief executive has warned it is important that network charge deferral schemes do not provide an “unfair advantage” to suppliers with unsustainable business models.

Speaking in response to Ofgem’s announcement this morning that energy networks are to defer up to £350 million of charges as a last resort for struggling energy suppliers and shippers, Audrey Gallacher said it was now time to discuss the long-term issues such as bad debt.

She said: “With many suppliers facing significant challenges as a result of supporting businesses and households who are in financial difficulty, this scheme will provide some temporary relief by allowing some suppliers to defer network charges for 3 months.

“We note Ofgem’s intention that this should be used as a last resort for those unable to access other sources of financial support and it will be important that the scheme does not provide an unfair advantage to any participating suppliers with unsustainable business models – and ensures companies meet their financial obligations in due course so customers aren’t at risk of picking up the cost.

“We now need to work with Ofgem and the government to discuss long term issues like the challenge of managing increased bad debt and rising industry charges, at a time when households and businesses will also be struggling financially.”

Meanwhile Steven Day, co-founder of renewable energy supplier Pure Planet, said the new measures provided a good balance, adding that providing help to only customers and not suppliers would be an asymmetric approach.

Speaking to Utility Week, he said: “Consumers are being supported because the government has asked suppliers to support by helping manage their bills and personal finances through this crisis.

“Here is an example of something happening over the other side of the fence, from an industry point of view, which is creative and will allow for some flexibility. It will potentially support suppliers as they in turn support consumers, so there is a nice balance to it.”

There has however been concern from some in the sector who see the proposals as a “back door bailout”.

One industry source, who did not wish to be named, labelled the plans as a “disgrace”,  and told Utility Week they had reservations about giving irresponsible companies money.

“Everyone in the industry wants more transparency, they should at least publish who is getting money,” they said.

Ofgem said while it would monitor uptake carefully in order to mitigate the risk of abuse, it would not publish a list of those taking part as the agreements would be between suppliers and network companies.