Things came to a head in February last year when MPs branded as “feeble” the energy sector’s response to the threat of a price cap (now in force), which they said the industry had only “brought upon itself”.
Publishing its report on the government’s draft bill to cap standard variable tariffs, the energy select committee said suppliers “did not take repeated warnings from the government seriously enough”. It also accused Ofgem of being “too slow and reluctant to use its extensive powers to step in and protect customers”.
In Utility Week at the time, committee chair Rachel Reeves wrote: “Customer loyalty should be rewarded by energy suppliers, not exploited.”
This reaction looks likely to continue with the price cap already set to rise in April.
Just weeks after arguing against the price cap, in June 2017 SSE’s chief executive, Alistair Phillips-Davies, found himself under fire for being awarded a hefty rise in his remuneration package, to £2.92 million.
Defending the increase, the company said at the time: “We recognise executives are paid substantial sums in line with their responsibilities, but at SSE executive remuneration is strongly linked to performance and length of service and the company has been and always will be disciplined in its approach to pay. We would encourage people to read the remuneration report in full.”
Networks next?
While not the first target of renationalisation, energy networks know they are in any Labour government’s sights. And the heat is already on.
Late last year Ofgem said it would “drive a hard bargain”, announcing proposals to reduce customer bills by about £45 a year from 2021. Welcoming the potential move, consumer groups said networks had “had it too good for too long”.
Earlier that year, the pressure was cranked up when energy secretary Greg Clark urged Ofgem to impose a “much tougher regime” on distribution network operators’ (DNOs) prices.
Speaking in the House of Commons, he agreed with backbench MP John Penrose’s that “Ofgem has been far too soft on these firms for ages, allowing them to get fat and lazy at customers’ expense”, and said that the energy regulator should be a “great deal tougher” with the DNOs in the future.
The Energy Networks Association said at the time the proposals would jeopardise investment for the switch to a greener and smarter energy system.