Retail reforms attract ire of firms and watchdog

Proposals to reform the energy retail market have been criticised by large and small suppliers and by the consumer watchdog, who believe the proposals clash with other government policies.

There are fears that Ofgem’s proposals cut across the government’s plans for smart meters, such as time-of-use tariffs and demand-side response, and that there is no way to measure progress. “We have no idea what success is supposed to look like,” one major supplier said.

Other big incumbents warn that the cost of new billing systems will be passed on to consumers, who in the main will not see much benefit.

Co-operative Energy’s Nigel Mason said Ofgem’s main idea – to limit the number of standard tariffs to one per payment method – would simply push tariff proliferation into non-standard tariffs.

Good Energy chief executive Juliet Davenport criticised Ofgem’s proposals to set the same standing charge for the evergreen tariff for all suppliers. “You don’t need to be an economist to understand that fixed costs are higher for smaller players,” she said.

Watchdog Consumer Focus called for an impact assessment. Director of energy Audrey Galla­cher said Ofgem’s proposals hinged on “some big leaps of faith” in terms of assumptions about how suppliers and consumers would behave. She said current Retail Market Review (RMR) plans could exacerbate the current split between active and sticky customers, with inactive customers also losing their existing discounts, such as those for taking dual fuels or paying by direct debit.

Gallacher said: “There is a real danger of unintended consequences.” She called for the regulator to show industry “its master plan”. Ofgem should “do more research to give stakeholders the confidence that the proposals will deliver the right outcomes, or listen to what people are saying and change its proposals”, she added.

Ofgem said it would “listen carefully” to stakeholders before publishing its decision in the summer.

Box: Uncertainties curb smart enthusiasm
Centrica, which is understood to be unhappy with RMR proposals, said in its 2011 results presentation that it had applied the brakes to its aggressive smart meter plans. Npower told Utility Week it would stop trials until there was a defined technical spec and comms protocol. However, Eon said it was still “committed to installing one million by the end of 2014”. Ofgem said: “Features of non-standard products, including their fixed duration, are unlikely to act as barriers to early adopters of time-of-use tariffs.”

By Brendan Coyne

This article first appeared in Utility Week’s print edition of 16 March 2012.

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