The government’s focus last summer on encouraging opt ‘in’ and ‘out’ switching when the energy price crisis was brewing indicates a regulatory failing “years in the making”, according to Scottish Power.
The supplier’s written response to the House of Commons’ Business, Energy & Industrial Strategy (BEIS) committee’s ongoing inquiry into the energy crisis also says the spate of insolvencies over recent months has been “entirely predictable” due to the entry into the market of so many companies with “ill-thought-out loss leading strategies” and poor financial resilience.
The company, whose chief executive Keith Anderson is due to give oral evidence to the committee next week, criticises a failure to put in place an effective monitoring and oversight regime of the supply market.
This failure went hand in hand during recent years with a narrow focus on switching levels as the key measure of a healthy and successful energy retail market, it says.
The focus on switching was apparent in the BEIS department’s launch last July of a consultation on “new and complex” reforms intended to promote ‘opt-in’ and ‘opt-out’ switching, the response says: “This consultation was launched just as the energy crisis was getting underway with the steady progression of small suppliers entering insolvency, thereby leaving their customers to be picked up by suppliers that they had had no part in choosing and with the associated costs of this Supplier of Last Resort process having to be met by consumers across the market.
“That there was so much focus on these switching workstreams at this point in time, rather than on taking steps to address the pressing issue of a weak market oversight regime, would seem to be indicative of a regulatory failing that had been some years in the making.
“With so many new entrant suppliers entering the GB energy retail market over the last few years, with ill-thought-out loss leading strategies and insufficient financial resilience, it was entirely predictable that there would be a further spate of insolvencies with the onset of sharp increases in global gas prices.”
The consultation welcomes last December’s announcement by the BEIS department that it would pause policy development on the consultation on opt-in and opt-out switching.
Scottish Power also says that the rigidity of the price cap framework has exacerbated the increase in global gas prices with significant negative knock-on impacts across the entire energy market.