Tom Crisp Editor 01603 604421 [email protected] Monday 20/11 – British Gas announces significant changes to its GB retail business model, including the withdrawal of its Standard Variable ENERGY PERSPECTIVE 02 Tariff for new customers. The Energy Networks Association launches a consultation on its Electricity Network Innovation Strategy. Bloomberg Creating a fairer market – Our New Energy Finance predicts the global energy storage market will fourth annual retail conference double six times between 2016 and 2030. EY says the coming decade POLICY 05 will be “critical” for the UK nuclear supply chain in the UK if it is to increase its capacity to deliver new build. Budget signals moratorium on new renewables spending Tuesday 21/11 – BP agrees to sell a package of its interests in the Energy industry disappointed by Budget Bruce assets in the North Sea to Serica Energy. E3G analysis finds Government made “grave renewables can make up 61% of the EU electricity mix by 2030 – strategic errors” over Hinkley above current targets and at a lower cost. Utility Warehouse confirms Point C: PAC over the half-year to 30 September its revenue rose 2.6% to £299mn, Parliamentary update - Week 47 2017 up from £291mn in 2016. REGULATION 11 Wednesday 22/11 – Chancellor Philip Hammond delivers the Autumn Budget, confirming the government will not introduce any new low- Ofgem initiates Charging carbon electricity levies – outside of existing commitments – until the Futures Forum One in, one out on SSE licence burden of current costs falls at a sustained level. The Public Accounts compliance Committee criticises the negotiation of the Hinkley Point C deal. EU Prescriptive licence condition on member states endorse the provisional deal that had been reached on back-billing to be introduced reform of the EU Emissions Trading System post-2020. Statkraft and INDUSTRY STRUCTURE 16 Statoil’s 402MW Dudgeon offshore windfarm in Great Yarmouth officially opens. British Gas sees huge customer losses but proposes fairer tariffs Thursday 23/11 – Centrica announces that between 30 June and the National Grid reports steady H1 end of October 2017 it GB business lost 823,000 energy supply 2017 performance accounts. The Shetland New Energy Solution proposal put forward by NUTWOOD 20 National Grid and Aggreko is rejected by Ofgem. The regulator also Evolution, not revolution, in GB confirms a £260,000 fine for supplier E over failures relating to its energy retail supply please – agents. Peter Atherton Friday 24/11 – The Environmental Audit Committee announces the MARKETS 22 launch of an inquiry to scrutinise the government’s approach to develop “world leading” Green Finance capabilities. Results from Ofgem’s large-scale randomised control trial suggest increased switching among customers who have been on standard variable tariffs for over three years. The EU’s Third Report on the State of the Energy Union argues that the energy transition is not possible without adapting the infrastructure to the needs of the future energy system. On 22 November we held to the energy system and that, as the scope of the our annual retail energy services market expands, so does the perception conference, this year titled of what engagement truly means. Rather than Fairness and Competition defining fairness specifically, it was perhaps better in the Retail Energy Market. to begin by identifying the principles that underpin fair markets. Now that we are in a world James Cunningham of price caps, the agenda is Miller said that a principles-based, rather than Writer refocussing on showing outcomes-based, approach to fairness will become 01603 959884 energy markets work for all increasingly important in shaping the required J.Cunningham@cornwall- insight.com consumers. But there are regulatory and policy responses to market two other key themes developments. He concluded that the issue of influencing the domestic sector. They are fairness is unlikely to be solved by a single silver technological innovation in companies’ bullet, but will instead require a suite of measures, propositions and services for customers, but also some of which were likely to endure the need to help those customers that cannot and Weights and measures will not engage, especially if they are vulnerable. Rachel Fletcher, Senior Partner at Ofgem, then This Energy Perspective reports on the main argued that there is an issue of social fairness themes and messages from the event. within the energy market. As of April 2017 some Setting out your stall 60% of customers were still on standard tariffs. Cornwall Insight CEO Gareth Miller opened Fletcher suggested that new suppliers will have to proceedings by noting that, as in previous years, increase their market share to survive, and that an the debate about competition in the market will ongoing focus on customer engagement will inevitably touch on the relative balance between support continued innovation. She emphasised the Big Six and Small and Medium Suppliers Ofgem’s recent work on improving engagement (SaMS), various issues of innovation, and political including its trials of a database of disengaged and regulatory interventions. However, he added customers (reflecting a CMA report that the context against which these discussions recommendation), penalties on suppliers for failed are now taking place has shifted dramatically. switches to make them clean data and improve consumer confidence, and putting in more reliable Miller said that the energy market is currently switching arrangements by 2020. Interestingly she going through a period of change more profound also suggested that technological advances could than at any point since price controls lapsed in the increase the likelihood of deeper segmentation early 2000s. He highlighted some of the work within the market. being done by Ofgem to address the issues of vulnerability and fairness, including a consultation Responding to criticisms that the recent comments on the supplier hub model, the implementation of from Ofgem CEO Dermot Nolan on price controls its disengaged customer database, and the were “aggressive”, Fletcher disagreed. Instead a implementation and planned extension of a price responsible regulator should question whether the cap for prepayment and vulnerable customers. structure of the market remains fit for purpose, These initiatives, Miller said, have the potential to adding that market arrangements need to be catalyse enduring change. structured in a way that allows customers to fully benefit from innovation. She gave the example of There have also been some notable changes in peer-to-peer energy trading, which may be being the business models of suppliers. Miller particularly hindered by the requirement to register meters to flagged the recent announcement of the proposed suppliers only for all the energy that flows through merger between the retail businesses of SSE and them at a specific time. npower, which evidenced that the traditional vertical integration model adopted by the largest Self-service players was disintegrating. Sara Vaughan, Strategy and Corporate Affairs Miller suggested that switching is not necessarily Director at E.ON UK, gave a large supplier’s the best metric of showing how customers relate perspective on current changes in the market, 2 emphasising that competition has already led to For example Steve Smith pointed out that the established players taking “radical action” in order switching process in energy is much simpler than to retain customers. She argued that there is a in other sectors, such as banking, but questioned need for regulation in the energy market to protect whether the required will from the industry was vulnerable customers, but that there is less need there to improve and speed up the switching to protect customers who could engage but simply process. He added that simply providing smart choose not to. On price controls Vaughan said that meters won’t make the market fairer, unless the they were an imperfect solution that could data from them is then made available for negatively impact customers, and that to be something useful to be done with it. effective they must still allow room for competition. Dodimead suggested that the potential future Chris Houghton, Managing Director of Retail at benefits of behind the meter technologies, such as OVO Energy, then gave a counter opinion, saying smart heating systems, will outstrip those offered that price caps will benefit the market by by SMETS 2 meters. But Rossiter said there was increasing competition and driving innovation in still a cost barrier to these types of systems. the market. He suggested that the profit pressures It was recognised that new technologies would resulting from a price cap would force companies create a more fragmented market, potentially to become more innovative with their business offering benefits to some consumers and an model to reduce costs. Houghton added that in the awareness that there may be consequences of this energy market there is a need for better fragmentation for all users including those not competition, rather than just more competition. directly affected, which may increase detriment. Pick and mix Village store Anna Moss, Retail Team Leader at Cornwall The afternoon session kicked off with a Insight, introducing a session on innovation and presentation by Pixie Energy Director Nigel smarter markets, began by highlighting the vast Cornwall, who articulated a vision of a new energy range of options available to domestic customers, supply landscape from a local perspective. with 65 active suppliers offering nearly 200 tariffs. Access to these deals is also much easier through Cornwall argued that policy and regulatory change the increasing presence of price comparison sites, has so far failed to keep up with the requirements and these options are now easier to understand. of the local energy supply industry and that it is Collective switches have also helped drive therefore time for some fresh thinking. Cornwall engagement by persuading some disengaged supported a root and branch review of the supplier customers to change supplier.