Supplier Failures Should Encourage Engagement

Share on facebook
Share on twitter
Share on linkedin

The UK energy market has now seen seven providers collapse in 2018.[1] As winter arrives, a number of suppliers are known to be struggling and it may be likely that more will follow. Importantly, the ramifications of supplier failures affect those that remain. As the market undergoes change, all suppliers need to involve themselves in discussions with policymakers and regulators to safeguard their businesses.

Obligations increase the burden on the businesses

Suppliers are one of the primary vehicles for implementing the Government’s energy policy. As the UK energy system undergoes transition and the political focus on the price of energy has intensified, suppliers have been charged with administering a number of initiatives. All of these require resource and a company’s ability to meet their duties under the Renewable Obligation (RO) is increasingly seen as a proxy for their financial health.[2] Ofgem has published details of 14 suppliers who have not paid what they owe under the RO scheme.[3]

Struggling suppliers are a risk to all

A shortfall in RO payments is utilised across the market. Ofgem’s safety net also means the costs of a failed supplier are shared between those that remain.[4]

There are more smaller suppliers

Intuitively, smaller suppliers appear more likely to struggle and increased competition has allowed more smaller suppliers into the market. In 2012, the ‘Big Six’ supplied 99 per cent of Britain’s domestic energy. Non-‘Big Six’ suppliers now account for 25 per cent of market.[5] Ofgem is reviewing licence conditions but this may not be sufficient to address the problems faced by many that are operating already. With the price cap due to take effect in January 2019 and further squeezes from wholesale price increases, more failures could be likely.

To avoid incurring the costs of additional supplier failures, or shortfalls in obligations, businesses need to engage with policymakers to help shape a regime that mitigates against these risks. Industry can contribute to the solution and there is a commercial imperative to do so.

Brevia Consulting provides straightforward political advice and support to businesses and organisations.

Discover how Brevia can help you and your organisation by contacting the Brevia Energy Team on 020 7091 1650 or contact@brevia.co.uk


[1] Ofgem, 23 November 2018, link

[2] The Times, 27 November 2018, link

[3] Ofgem, Renewables Obligation Late Payment Distribution 2017-2018, link

[4] Ofgem, 26 October 2016, link

[5] Ofgem, Retail Market Indicatorslink

LATEST NEWS

Transport

Political Signals From The Flybe Rescue Deal

This week, the Government stepped in to save the regional airline, Flybe, from collapse. Having won a majority by gaining votes in nearly every region of the UK, the intervention symbolises Boris Johnson’s stated desire to ‘level up’ the country.

Read More »
Nuclear

Five Notable Developments In Nuclear This Week 17.01.2020

On 14 January 2020, the European Union (UN) unveiled plans for €1 trillion in sustainable investments over the coming decade. The investment is designed to make the EU climate-neutral by 2050, however, the transition fund money under the plan will not finance the construction of nuclear power plants.

Read More »
General

Labour Party Leadership Election Explained

Following defeat last week, Jeremy Corbyn announced he would not stand as Labour Party leader at the next general election. The Labour Party will have to elect another leader and the next contest will be the first to take place under new rules established in 2018.

Read More »