Monthly Archives: December 2016

Britain’s increasing reliance on “intermittent” renewable energy means that the country is facing an unprecedented supply crisis, a senior Ofgem executive has warned.

Andrew Wright, a senior partner at Ofgem and former interim chief executive, warned that households could be forced to pay extra to keep their lights on while their neighbours “sit in the dark” because “not everyone will be able to use as much as electricity as they want”.

He warned that in future richer customers will be able to “pay for a higher level of reliability” while other households are left without electricity.

Mr Wright said that because Britain has lost fuel capacity because of the closure of coal mines, there is now “much less flexibility” for suppliers.

In a stark warning about the future of energy supply in Britain, Mr Wright said that consumers could be forced to pay more if they want to ensure they always have power.

“At the moment everyone has the same network – with some difference between rural and urban – but this is changing and these changes will produce some choices for society,” he told a recent conference.

“We are currently all paying broadly the same price but we could be moving away from that and there will be some new features in the market which may see some choose to pay for a higher level of reliability.

 “One household may be sitting with their lights on, charging their Tesla electric car, while someone else will be sitting in the dark.”

Mr Wright, who Ofgem last night insisted was speaking in a “personal capacity” appeared to lay blame to any future supply issues on the recent focus on renewable energy.

He said: “The system we are all familiar with has some redundancy built into it. It was pretty straightforward and there was a supply margin, but increasing intermittency from renewable energy is producing profound changes to this system.

“We now have much less flexibility with the loss of fossil fuel capacity. Coal has been important, but this is disappearing.”

 He added: “In the future not everyone will be able to use as much as electricity as they want, and there will be a need to re-write the rules.”

An Ofgem spokesman said: ” Ofgem is fully committed to delivering secure supplies for all consumers now and in the future. This is our number one priority. This is why we have driven up network reliability standards and worked closely with Government to ensure secure energy supplies.”

“In order to protect consumers every regulator has to look a possible future challenges. Mr Wright was talking at an University conference in a personal capacity and looking at possible issues that might or might not arise in 10-15 years time.”

Philip Hammond, the Chancellor, has previously said that Britain will need to invest “eye-wateringly large sums of money” just to keep the lights on.

The Chancellor put the cost at around £100 billion in the next 20 years to ensure the country meets its energy needs.

Four of the UK’s largest energy companies have been barring their own customers from some of the best deals for gas and electricity, the BBC’s Moneybox programme has learnt.

The cheapest deals are often reserved for new customers only.

Meanwhile existing customers have been offered deals which can be hundreds of pounds a year more expensive.

The four companies, E.ON, EDF, SSE and British Gas said they were simply responding to changes in the market.

While the British Gas tariff has now been withdrawn, other suppliers are still restricting their offers to new customers only.

Such deals were originally banned by the regulator Ofgem in April 2014. Following a recommendation from the Competition and Markets Authority (CMA) in April this year, Ofgem let it be known it would no longer enforce these rules.

‘Gob-smacked’

The discovery of such deals has as come a surprise to some leading industry figures.

Ken Geddes is the chief executive of Scottish-based Energylinx, the fourth biggest energy price comparison business.

When the BBC told Mr Geddes about the new tariffs, he declared himself “stunned” by the difference between the prices some companies offered new and existing customers.

Mr Geddes immediately tested a new-customer-only tariff from E.ON, launched in mid-September.

He first applied as an E.ON customer and then as a customer of another company. The difference in the the two prices he got from E.ON was £260.

“Having spent over a decade doing this job, I don’t think I’ve ever seen that differential”, Mr Geddes told the BBC. “I’m just gob-smacked as to the difference in price”.

‘Filtered out’

Large differences in price between new and existing customers are not confined to E.ON.

In the summer, British Gas launched a new-customer-only one year tariff offered exclusively through Uswitch – the UK’s biggest energy price comparison website.

For new customers with average household energy consumption, the British Gas “Home Energy Exclusive Jun 17” tariff cost £735 a year. But for existing customers – barred from that deal – the best British Gas price for the same amount of energy was £989.

That British Gas tariff has now been withdrawn but others are appearing.

The SSE new-customer-only tariff, launched in September, offered new customers on average consumption a year’s energy for £759 . For existing customers, SSE’s best deal cost £972 – a difference of over £200.

Customers were unlikely to have learned such low-priced tariffs were available from their companies even if they searched Uswitch and Energy Helpline.

That’s because such websites start by asking users for the name of their existing energy supplier. New-customer-only deals from that supplier are then filtered out.

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‘Very sorry’

As a long-standing customer of EDF, I wanted to find out what tariff I would be offered.

In a web-chat, I was told the tariffs available to me were: “Blue+ Price Protection Sep 2017” – costing £133 more than EDF’s new-customer-only tariff, and “Blue+ Price Freeze Sep 2018” costing almost £300 more.

Were these the “very best tariffs EDF offers?” I asked the agent.

“Yes” was the emphatic reply.

When pressed about the much cheaper new tariff EDF had just launched, the agent replied, “I’m very sorry. This is only for new customers – not existing customers”.

On Friday, EDF relaunched their new-customer-only deal, cutting the price by around £50 a year. So it’s a better deal than before but it’s still not for existing customers.

Strategy

Not all major energy suppliers plan to offer such tariffs.

Scottish Power’s commercial director Colin McNeill told the BBC his company would not offer them.

“These tariffs must stop,” Mr McNeill said. “We must recognise that we are still not a trusted industry, and perceived sharp practices do the industry no favours.”

With Scottish Power, he added: “Any of our customers can switch freely to any of our tariffs at any time.”

The four energy companies which have offered the new-customer only tariffs, E.ON, EDF, SSE and British Gas, all say that they are responding to changes in the energy market and that their new tariffs are part of a strategy to serve a wide range of customers.

All four companies declined the BBC’s invitation to be interviewed about their new exclusive offers.

Ofgem’s chief executive Dermot Nolan told the BBC that Ofgem had acted on the CMA’s recommendation “to make energy competition more similar to telecoms because on the whole that will mean lower prices and better deals for consumers”.