On Tuesday 26 July, the Westminster’s Business, Energy and Industrial Strategy (BEIS) Committee published a report on ‘Energy pricing and the future of the Energy Market’. Centre for Energy Ethics (CEE) members Sean Field, Mette High, Emilka Skrzypek, and David Ulph submitted evidence to the Committee, which was accepted and published with its report.
The evidence submitted by the CEE concluded that the pursuit of greater competition in the UK retail energy market encouraged excess market entry of inexperienced energy suppliers that were unprepared, and under-hedged, for wholesale price shocks. It also concluded that low and middle-income households in the UK are most vulnerable to the impact of rising energy prices and are currently under served by existing support schemes.
The evidence submitted by the CEE recommended that the Government should consider:
- Market reforms aimed at bolstering financial and natural hedging practices among suppliers.
- Energy system stress testing to assess the UK’s ability to adapt to rapid changes in energy wholesale prices, demand, and supply.
- An exceptionally low tariff scheme for the poorest households.
- Investment in new flexible energy storage facilities and infrastructure.
The Committee’s conclusions reflect the conclusions of the CEE. The Committee found that inexperienced energy companies took high risk decisions and did not hedge properly. It also found that deregulation aimed at enhancing competition contributed to a market failure that cost taxpayers billions of pounds, and that current energy support schemes insufficiently serve low-income households. The BEIS Committee, thus, recommended that the Government:
- Update its package of support mechanisms to help the most exposed households and, in particular, introduce an exceptionally low “social tariff”.
- Introduce a national homes insulation programme to bring down energy bills.
- Allow Ofgem to press ahead with a package of reforms aimed at increasing the financial resilience of the market, including stress testing, but is sceptical of Ofgem’s ability to undertake this task.
The Centre for Energy Ethics is committed to making impactful contributions to public and policy debates. With a broad range of cross-disciplinary expertise, the Centre and its members are well positioned and eager to translate research and expertise into knowledge and action.
Inquiries about the CEE’s evidence submission should be directed to Dr Sean Field ([email protected]).
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