What major energy users want

A new Utility Markets Policy Group will bring focused insight into the impact of political interventions on major energy and water customers and spur action for change, says Andrew Bainbridge.

A few weeks before Angela Knight quit her job as boss of Energy UK, the suppliers’ trade union, I suggested we should join forces to get major customers working with suppliers to develop trust. I urged her to consider that unless both sides learn more from each other the problems they face will not just continue but escalate.

Sadly, due to pressure on time and resources the partnership did not come into being – despite an acknowledgement from Energy UK that there is a need to restore trust between suppliers and their customers, including an important demographic like the major users we represent.

Since the problem won’t go away, the director general of the Major Energy Users’ Council (MEUC), Andrew Buckley, has created a Utility Markets Policy Group to bring leading customers and energy and water suppliers together to advise the new government on the best way of getting us out of the current difficulties.

We see government intervention as the villain. Although politicians and civil servants have a key role to play in safeguarding the interests of domestic and small customers, we want greater freedom for suppliers and big customers to operate without the fear that their plans will be sabotaged by new policy directives (which come from people who have never been involved either in supplying energy or using it on a large scale).

The next government will have to accommodate the world oil price collapse within its plans for a low-carbon economy and secure, affordable supplies. The expectation that customers should pay the increased costs needs to be reassessed if the UK economy is to benefit as other countries will. Put simply, we need less intervention and more competitive markets.

The Utility Market Policy Group will:

•    identify ways to simplify over-complicated markets and test reactions from the people who work at the coal face;

•    refine the ideas as a result of feedback and discuss with government officials and regulators how practical improvements can be made;

•    present initial thoughts at executive breakfasts in March in Bolton, Coventry and London where large customers will be invited to bring a director to meet suppliers and discuss the issues;

•    produce a policy action plan for discussion with the political decision-makers and at the MEUC’s annual Westminster conference in December.

There’s no point in any of us continuing to moan about the problems. So let’s put our brains on the line and see some real action.

When I asked our major users what their main concerns were for 2015 and what they wanted us to focus on, there was broad consensus on the main issues – so we have a good foundation for action.

Featuring high on all agendas are reducing cost, security of supply, using sustainable energy, understanding cost breakdown and making sense of government initiatives. One large user told me: “The decision-makers don’t realise the implications of Electricity Market Reform, contracts for differences and ESOS [energy saving opportunity scheme] and they expect customers to implement without answering our questions. Larger businesses often take longer to adapt and miss deadlines. Greater clarity is essential.”

We’ve reached a stage where lack of awareness, understanding or ability to keep up with changes to tariff and balancing schemes now means many businesses are discouraged from investigating how to capitalise on energy efficiency – despite many delegates at our autumn roadshows saying they were sure there is more they could do.

This attitude has to change. The MEUC behaviour change programme “Saving Energy Through People” is achieving excellent results in several blue chip organisations and our Demand Side Management Group has enthusiastic support from customers and government. Most large business customers who use brokers would like to see fee transparency to satisfy themselves that the charges are fair and that they are getting value for money.

The former energy minister, our good friend Charles Hendry, has welcomed the fall in fuel prices. However, if we are entering a period of cheaper oil and gas, he says we need to understand how that affects our North Sea industries and the impact on energy security. Companies agree and are keen to gain greater understanding and visibility of the implications of the recent plunge in oil and gas prices.

Equally, recent debate over fracking has peaked interest once again in this controversial industry and the role it may come to play in providing energy security for the UK. Major users who attended our meetings when shale was enjoying its heyday in the US were keen to see similar benefits here. However, there is an awareness that the environment has changed and a desire to understand the reasons for it. Investment will be hard to find now that prices have dropped, and companies will need to look elsewhere for security of supply if shale is deemed too complicated and too expensive.

Government policy on nuclear and renewables has been muddled but now we are a net importer of gas, long-term policies must be thought through with more care. Gas storage development is vital. France and Germany say they have 100-120 days of storage but the UK has just two weeks’ supply. We must have a secure policy. Some storage projects have planning consent but no finance, and getting them built has to be a top priority.

Another big bugbear for major energy and water customers is poor quality billing. More time must be spent on identifying what goes wrong and improving the systems both sides use. Finally, as sustainability becomes increasingly important, legislators need to understand what this means to different types of energy user, appreciate how they are affected and provide clear, sensitive advice.

Despite the looming distraction of a general election, we hope policymakers will listen carefully as suppliers and customers endeavour to give them sound advice on the way forward for a more prosperous and confident economy.

Andrew Bainbridge, chair, Major Energy Users’ Council