Customers, Policy & regulation

Interventions in the energy retail market risk “unintended consequences” and could “stop innovation”

“Any interventions in the market do run the risk of potentially stopping innovation,” the Energy UK chief executive has told Utility Week.

“You have got to be very very wary of the unintended consequences [of intervention]” warned Lawrence Slade, ahead of a Commons debate on energy pricing.

He acknowledged that it is important to “put pressure on the market and – to coin a phrase – ‘make sure this market works for everyone’.”

However, Slade also insisted that energy companies must be allowed to be profitable and that they should be rewarded for taking innovative risks.

“Let’s make sure that we are encouraging innovation and creating conditions which reward innovation and reward companies that are taking a risk,” said Slade.

There should not “be a problem” with companies sharing the financial benefits of creative service or smart technology offerings. “Competition should decide how big a margin can be made,” he stated.

Addressing broader issues around the competitiveness of domestic energy retail, Slade said that government, the regulator, and the energy industry are “struggling” to define “what good looks like”.

He observed that a focus on inter-supplier switching levels may be giving an incomplete picture of market competitiveness and advocated a broader appreciation of a range of performance measures, including internal switching rates, complaints data and service levels.

“It just so happens that the measure which is in the public domain and therefore is easily accessible every month is the external switching figures. But we shouldn’t consider them as the be all and end all,” said Slade.

The trade body boss confided that Energy UK is planning a series of industry workshops to try and establish a broad industry consensus for “what good looks like” in a competitive energy retail market.

Energy UK will seek engagement from a wide range of suppliers in these workshops, in order to be representative of increasingly diverse supplier types and service offerings.

The first workshop is expected to take place “in a few weeks”.

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