The state of the energy retail market has been thrust into the spotlight over the past fortnight as surging wholesale power prices ramped up the pressure on an already beleaguered market.
However, Utility Week readers already knew only too well that this was a broken market long in need of reform.
The pandemic exposed once again how precarious some business models were, sparking fears that a wave of Covid-related debt would result in multiple supplier failures.
In fact, 2020 turned out to be a pretty benign year in terms of market exits and the expected surge in consumer debt mercifully failed to appear.
However, the problems did not go away and the calls from industry for reform did not die down. Our recent Remaking Energy Retail report pointed to both the huge opportunities available for innovative retailers in the energy transition but also the frustrating lack of reform in policy and regulation to support this.
It would be wrong to put all the blame at the door of policymakers and regulators. There is no doubt there are businesses that capitalised on low prices last year to offer unsustainable tariffs. Now the music has stopped these short-sighted strategies have been exposed.
But there is a justifiable sense of frustration that lessons have not been learnt and there has been little meaningful action on developing a retail market that is fit to lead the energy transition.
This was evident in the pamphlet-sized Energy Retail Strategy published in July, with its much-maligned focus on auto-switching but little else of substance.
So, let us hope that one positive to come out of the pain the sector is going through at the moment is that it prompts real engagement with government and there is genuine action on reforming the market.
That’s why Utility Week is today launching our Energy Reset campaign, aimed at looking beyond the crisis towards a new dawn for energy retail – one that supports sustainable operators to spearhead the net zero push.
We want to work with the industry, government and regulators to support this vision and to seek consensus on a way forward.
However, there are some clear actions we would call for at the outset:
1) Everyone can agree that customers, and particularly those in vulnerable situations, must be protected. Government has to ensure that in the event of multiple market exits or the failure of a significant supplier there is a safety net, whether that is support for retailers picking up the pieces or the creation of a state-backed entity in the short-term
2) Government must fulfill its promises on energy efficiency and bring forward a detailed, costed plan to ensure energy bills are driven down by keeping homes warm
3) There must be an immediate, and meaningful, review of the green levies heaped onto energy bills, ending a regressive system and easing the pressure on bills
4) The government should end its damaging obsession with auto-switching and re-focus its energy retail strategy on fostering engagement and long-term relationships between retailers and customers.
Companies themselves must also pledge to drive behaviours of the past out of the industry of the future and sign up to sector-wide commitments on both hedging and eradicating loyalty penalties
These are just a few suggestions to kickstart a wider conversation. Far greater minds than mine have put forward detailed models for a future energy market design, which government has paid little more than lipservice to.
The Energy Reset campaign will track every aspect of this unfolding drama, ask difficult questions of government, regulators and the industry and seek opportunities to deliver long-promised changes. Utility Week members will be invited to bespoke events to share insight and bold visions for the future.
The eyes of the country are on the utilities sector. Let’s harness the opportunity to work together towards reshaping the market to drive real value for consumers and accelerate net zero.