Business energy market reviewconcerns for the current state of the non-domestic gas and electricity markets.
Call for input regarding its concerns
The business energy market review from Ofgem recently published a call for input regarding its concerns for the current state of the non-domestic gas and electricity markets. The volatile market conditions of the last 18 months have left many consumers across both domestic and non-domestic markets with a lot of uncertainty.
The regulator identified many of the consumer harms that it was alerted to in a letter to non-domestic suppliers in November 2022, and has since engaged with suppliers, outlining areas of good practice that could help to address these harms.
Ofgem now considers a call for input as necessary to explore these issues in greater detail and is seeking views on three key themes, with responses requested by 31 March.
The first theme is around pricing and contract behaviour, specifically looking at how suppliers have spread cost of risks fairly across their customer base, and how they may use strategies to manage them in a way that is proportionate.
Ofgem is also looking for evidence to provide a view of competition in market. It has found that many consumers are still struggling to find deals to contract and has suggested that a lack of ‘meaningful competition’ and less competitive pressure has led to a drop in standards and less innovation across the market.
The third area of interest is the potential for greater regulatory support across different consumer groups. hile much of Ofgem’s focus has been on microbusinesses over recent years, it is considering extending the kind of support offered to microbusinesses out further.
The regulator noted that small and medium enterprises SMEs , who just fall outside of the regulator’s definition of a microbusiness, can find it difficult to actively engage in the energy market.
Ofgem has suggested the potential expansion of the microbusiness definition, or to even introduce a new category altogether.
While in its early stages now, the evidence gathered through this call for input will help to inform how Ofgem moves forward, with the regulator indicating that this review may result in wide-scale regulatory changes. On 14 March, Ofgem published a letter sent to the Chancellor of the Exchequer, providing an update on the evidence gathered so far in its review of the non-domestic market.
The business energy market review update outlines some initial findings, such as some deemed contract rates being higher than can be explained by market conditions, assessing the proportionality of higher security deposits, as well as concerns around compliance with the Energy Bill Relief Scheme (EBRS), with some suppliers found to be acting against its intent. The full report on findings will be published in summer 2023 with further steps to be consulted on in due course.
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