homenews and insights policy and regulation update october

Policy and regulation changes in the energy industry

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By SSE Energy Solutions
12 October 2022

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We understand that it’s a particularly difficult and uncertain time for so many businesses. And we recognise that the current energy market conditions make it even harder.

Here at SSE Energy Solutions, we’ll continue to work with our regulatory and government policy experts to bring you the latest updates in the energy market right now. If you haven’t already, you can read our previous policy and regulation update here.

You can read the full newsletter update, or we’ve summarised the main points below.

Government’s new scheme will help businesses to manage energy costs

The Department for Business, Energy and Industrial Strategy (BEIS) has confirmed that they’ll be helping businesses reduce their energy bills through the Energy Bill Relief Scheme (EBRS).

The scheme applies a discount to gas and electricity unit rates for the majority of non-domestic energy customers. The EBRS discount will be applied for six months, covering consumption from 1 October 2022 to 31 March 2023.

Read more about the scheme and what it means for different business energy tariffs here.

Policy allowances relating to EU energy and certificate imports are ending

Payments to electricity generators – supported by the Contracts for Difference scheme and the Feed-in Tariffs scheme – are based on an energy supplier’s share of the electricity market. Previously, suppliers could request exemption from these costs if they could demonstrate they supplied renewable electricity that had been generated in the EU.

Ofgem continues to take steps to strengthen the financial resilience of the sector

Historically, some suppliers have used cashflow from customer credit balances and Renewables Obligation payments to fund business activities. This leaves consumers and market participants exposed to costs which are mutualised in the event of their failure. Ofgem considers this as ‘excessive risk-taking’ and want to introduce a requirement for suppliers to ringfence these balances to ensure the money is protected.

This proposal currently only applies to domestic suppliers. However, it’s expected this will benefit the non-domestic market as it will reduce the value of costs to be mutualised if a supplier exits the market.

Significant changes to network charges (DUoS, TNUoS and BSUoS) are being considered

Ofgem is currently considering a number of substantial changes to network charges (DUoS, TNUoS, BSUoS). These changes include several adjustments and improvements to the way customers interact with the energy they use.

For a more detailed update on the possible changes to network charges, read out full newsletter here.

Ofgem publishes open letter in response to ESO review of the balancing market

The Electricity System Operator, National Grid ESO, plays a key role in managing system balance between supply and demand to maintain a secure supply of electricity.

Towards the end of 2021, the balancing costs were double from the previous year. In response to this increase, the ESO completed a review which concluded that there was no clear evidence that market participants’ behaviour was inconsistent with the rules. However, they recognised that changes to these rules could help to minimise these costs going forward.

Ofgem’s own investigation highlighted some instances of ‘immoderate’ behaviour and proposed a number of short-term reforms as a result.

Microbusiness consumer remedies will be introduced from October

Following the conclusion of Ofgem’s strategic review of the microbusiness consumer market, additional consumer protections are being introduced.

From 1 October, suppliers must ensure TPIs provide consumers with information about any third-party costs. And microbusinesses no longer need to provide notice of their intention to switch (except in limited circumstances e.g., variable contracts).

From 1 December, suppliers can only work with third parties who are signed up to a qualifying alternative dispute resolution scheme.

Industry programmes continue at pace

  • Faster switching goes live

The Ofgem Switching Programme went live at 9am on Monday 18 July as anticipated. The programme means customers can switch supplier faster than ever before and some industry processes across gas and electricity are harmonised for the first time.

  • Smart meters remain at the heart of the transition to net zero

In January 2022, new regulatory framework was introduced which means suppliers must hit individual installation targets. Since then, 54,670 smart and advanced meters were installed in smaller non-domestic sites by large energy suppliers. This means that at the end of Q2 2022, 48% of the non-domestic market had a working smart or AMR meter.

  • Consultation on the working draft of the Market-wide Half Hourly Settlement programme is now underway

Market-wide Half Hourly Settlement (MHHS) is expected to deliver a range of consumer benefits. Ofgem think it will help suppliers make the most out of ‘time of use’ products to encourage consumers to be more flexible with their consumption. The consultation is designed to seek industry feedback on the working draft, with a view implement MHHS as early as possible and preferably no later than October 2025.