homenews and insights policy and regulation update

Policy and regulation changes in the energy industry

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By SSE Energy Solutions
17 June 2022

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Running a business is challenging at the best of times. And we recognise that the current energy market conditions make it even harder. The energy market is on a transition to become smarter and more flexible. Upcoming policy and regulation changes are expected to change the way businesses engage with the energy they use.

Here at SSE Energy Solutions, we’ve worked with our regulatory and government policy experts to summarise some of the ‘hot topics’ in the energy market right now. You can read the full update here or we’ve summarised some of the main points below…

Changes to the supplier failure processes

Within the energy industry, there are several mechanisms in place to recover the bad debts of the failed supplier from the remaining suppliers. In some cases, these costs will be passed to consumers, either directly by suppliers, or indirectly through increases in charges levied by gas transporters or distribution network operators.

However, a change to the gas industry codes is expected to save the non-domestic gas sector more than £100 million in 2022/23. The costs incurred by the Ofgem-appointed Supplier of Last Resort (SoLR) will now be allocated within their own market sector. So, the non-domestic sector won’t incur any costs for gas supplier failures in the domestic sector, and vice versa.

Making switching faster than ever before

This Switching Programme, expected to go live in July 2022, will lead to gas and electricity processes being aligned for the first time, resulting in a new ‘Central Switching Service’. Initially, domestic consumers will be able to submit a request to switch and be with that supplier within five working days. Then, after processes and systems become embedded, a consumer should be able to request to switch and be with that supplier by midnight the following working day. And it’ll be two working days for a non-domestic consumer.

A new smart meter programme

The Smart Metering Implementation Programme is a government project which aims to bring next-generation smart meters to Britain’s homes and small businesses. Introduced in January 2022, a new target-based framework means suppliers need to complete a minimum number of smart installations per year until 2025.

With the non-domestic market already 49% of the way there, this framework is a renewed focus to maximise activity and ensure as many customers as possible take advantage of what smart meters have to offer.

An industry programme on half hourly settlement

In August 2021, Ofgem announced its decision on Market-wide Half Hourly Settlement, kicking off an industry programme to deliver the changes needed by October 2025. With electricity demand expected to increase in future decades (in line with the anticipated growth in electric vehicles and electrification of heat), this programme should incentivise suppliers to offer more products that reflect the real-time costs of supply. It should also reward customers for responding to price signals, reduce market-wide balancing costs and minimise the need for more costly network reinforcement.

The industry programme, led by Elexon, the Balancing and Settlement Code administrator, is expected to publish its first baselined plan by 29 July.

A new green gas incentive

The Green Gas Support Scheme (GGSS) is a government initiative that provides financial incentives to produce biomethane from new anaerobic digestion plants to increase the proportion of green gas in the gas grid.

The GGSS is funded by the Green Gas Levy (GGL) which is paid for by energy suppliers, according to the number of meters they supply. The levy will be collected from energy suppliers from 1 April 2022 and will be set annually by the government.

More protection for microbusinesses

Ofgem concluded its strategic review of the microbusiness consumer market in March 2022. In October and December 2022, they’ll implement new measures to improve protections for microbusiness consumers.

There will be a new requirement for suppliers to ensure energy brokers confirm their fees to consumers before the contract is agreed. Consumers now also have the right to bring complaints about broker conduct to an independent dispute resolution provider. Plus, consumers now no longer need to submit written termination notices to suppliers ahead of their contract end date.

Potential changes to network charges

Ofgem is currently considering substantial changes to network charges including DUoS, TNUoS, BSUoS, and how these interact with flexibility markets.

It’s not yet confirmed what these changes will be, but we’ve outlined some likely possibilities in the full policy and regulation update.