PN 06/21: COVID-19 and the business retail market – Ofwat consults on how to address increases in bad debt

Measures aimed at: combating the spread of Covid-19; and strengthening protections for Non-Household customers who are late paying their bills; could result in higher than expected levels of bad debt in the business retail market.

In April 2020 Ofwat committed to provide additional regulatory protection if bad debt costs across the market exceeded 2% of Non-Household revenue, which it considered was the level of bad debt an efficient and prudent Retailer should have planned for.

Today Ofwat has signalled that, on the basis of available information, levels of bad debt across the market are likely to exceed this 2% threshold.

As a result Ofwat is consulting on amending the price caps, which apply to small and medium Non-Household customers who have not engaged in the market. Retailers will be expected to bear market-wide bad debt costs up to 2% in full. Ofwat proposes adjusting the price caps to enable market-wide bad debt costs in excess of 2% to be shared between Retailers and Non-Household customers.

Ofwat proposes to make an initial adjustment from April 2022, with a subsequent adjustment once more accurate information is available. Ofwat has made it clear that if bad debt costs turn out not to exceed the 2% threshold, it will unwind any additional protections implemented.

Ofwat’s consultation sets out the following preferred positions in relation to:

  • Timing – Ofwat proposes Retailers’ accounting estimates be used to estimate initial bad debt costs. A subsequent adjustment will be made once more accurate information is available.
  • Recovery mechanism – Ofwat proposes to make a market-wide, uniform uplift to price cap levels, giving Retailers additional freedom to adjust their prices in the light of increased bad debt costs.
  • Sharing factors – If market-wide bad debt costs exceed 2% Ofwat proposes the following sharing factors:
    • Outturn bad debt costs up to 3% – Retailers and Non-Household customers should each be expected to bear 50% of any market-wide bad debt costs in excess of 2%.
    • Outturn bad debt costs exceed 3% – Retailers should be expected to bear 25% of any market-wide bad debt costs in excess of 2% and Non-Household customers 75%.

Georgina Mills, Business Retail Market Director at Ofwat said:

‘These proposals are aimed at protecting the interests of Non-Household customers in the short and longer term, including from the risk of systemic Retailer failure as the business retail market continues to feel the impacts of COVID-19.

In doing so we want to minimise any additional costs for customers in the shorter term by promoting efficiency and supporting competition. By setting out our proposals today we are also providing additional clarity to Retailers and their investors.’


Notes to editors

  1. Bad Debt – Consultation
  2. Ofwat is seeking views and evidence from all interested stakeholders by 5pm Tuesday 6th April 2021.
  3. Maximum price restraints (i.e. price caps) relating to certain types of Non-Household customers on schemes of terms and conditions are set out in the Retail Exit Code.

Bulb launches EV solution offering cheaper overnight charging

Bulb has launched a new electric vehicle (EV) plan that offers 100% renewable electricity and cheaper charging at night as key features.

The plan is currently being trialed by Bulb members, although it is set to expand in coming weeks. It allows EV drivers to charge their car at a cheaper rate of 4p/kWh between 2am and 6am, with this rising to around 20p/kWh outside of these hours.

Drivers will also be able to schedule and track the cost of charging, with visibility of the live status of their car, including battery level, range and charging status.

These features are available through Bulb’s app, as is the ability to order a charger to allow drivers to charge more conveniently at home.

The app is compatible with 75% of electric cars, Bulb said, claiming it as the highest level of compatibility in the market due to the app connecting with cars rather than chargers.

There is also the ability for drivers to order a EO Mini Pro 2 charger, arrange installation and access the EVHS grant from Bulb’s website.

Geraldine de Boisse, VP Innovation at Bulb, said the energy supplier is “making it simpler and easier” for EV drivers to own an electric car and “do their bit for the planet”.

Last week, the company was named the fastest growing firm in Europe as part of the FT 1000, with a compound annual growth rate of 1159.3%.

It joins a number of suppliers in offering EV solutions. In December 2020, EDF launched its cheapest EV tariff to date, with the zero carbon GoElectric 35 tariff offering an off-peak rate of 4.5p/KWh. For this, off peak is classified as 12am-5am daily.

Other offerings from suppliers includes ScottishPower’s SmartGreen EV tariff and a charging bundle from Shell that includes a dedicated EV tariff allowing 2,000 miles worth of free charging per year and a discounted home smart charger installed for £299.


Ofgem awards licence for grid link to world’s largest wind farm

  • Ofgem’s regulatory framework secures £1.2 billion investment in grid link connecting the world’s largest offshore wind farm
  • Framework provides revenue certainty to investors while saving consumers hundreds of millions of pounds on their energy bills
  • Ofgem is helping to deliver government target of 40GW offshore wind by 2030 at the lowest cost to consumers

Ofgem has awarded a licence for the grid link to the world’s largest offshore wind farm after securing a record £1.2 billion investment.

Diamond Transmission Partners, a consortium led by Mitsubishi Corporation, the Japanese industrial group, was selected by Ofgem to own and operate the offshore transmission system linking Hornsea One to the British mainland.

The grid link for the 1.2GW wind farm off the coast of Yorkshire can deliver enough electricity to power more than one million homes.

The UK government has set a target of 40GW offshore wind capacity by 2030, almost quadruple the existing capacity, to help reach net zero emissions by 2050. New electricity grid links are needed to deliver this power to homes and businesses in Britain.

Under the regulatory framework, bidders compete to buy these links from the wind farm developer. In return the winning bidder receives a guaranteed level of income which is set by Ofgem for running the link for up to 25 years.

Providing certainty in this way allows bidders to price very keenly, reducing the costs of offshore wind and saving consumers money.

Ofgem has awarded 21 licences through this process, with a total of £5.7 billion being invested in grid links for 7.8GW of offshore wind capacity.

The first 15 licences alone have delivered at least £700 million in savings to consumers.

Ørsted, which built the Hornsea project, has built 12 offshore wind farms in Britain in total.

Rebecca Barnett, deputy director for commercial and assurance at Ofgem, said: “Today’s record investment demonstrates the appetite of global investors to support the UK’s transition to net zero emissions.

“Ofgem’s regulatory framework ensures that this investment can be attracted at the lowest possible cost, saving consumers hundreds of millions of pounds on their energy bills.”

Notes to Editors

  1. Hornsea One wind farm is located 120km off the Yorkshire coast and consists of 174 seven megawatt wind turbines.
  2. Ofgem has awarded the licence to own and operate the transmission assets for Hornsea One to Diamond Transmission Partners, a consortium comprising Mitsubishi Corporation and Chubu Electric Power Co., Inc., a Japanese utility.
  3. The developer of the windfarm and offshore transmission system is Ørsted and Global Infrastructure Partners. Ørsted’s and Global Infrastructure Partners’ initial estimated value (which is the forecast for the development and construction) of the transmission assets was £1.396 billion. Following Ofgem’s assessment of the final project costs, the final transfer value Diamond Transmission Partners will pay to Ørsted and Global Infrastructure Partners is £1.175 billion.
  4. The Offshore Transmission (OFTO) regime was developed by the Department for Business, Energy and Industrial Strategy and Ofgem, and was launched in 2009. For further information on the OFTO regime, see Offshore transmission tenders.
  5. Qualifying projects are grouped into competitive tender rounds and announced together. Potential bidders are also assessed at a pre-qualification stage, with qualifying bidders able to bid on all of the projects within a tender round. The Hornsea One wind farm’s offshore transmission system forms part of tender round six which started in 2018. The other two transmission systems in round six are to the East Anglia One wind farm (initial tender value £813.6m) and to Beatrice wind farm (£498.5m). Both are at Preferred Bidder stage. Ofgem will assess consumer savings for the most recent tender rounds later this year.
  6. To bolster the UK’s vibrant offshore wind sector, Ofgem is working with government and stakeholders to enable a more co-ordinated approach to offshore network development required for the rapid growth of offshore wind power. The Government’s offshore transmission network review will explore how the offshore transmission network could be designed and delivered, consistent with the ambition to deliver net zero emissions by 2050.

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If you are an energy customer looking for help and advice, including complaints about energy firms, please see our Household gas and electricity guide. Citizens Advice also provide a free, impartial helpline service across a range of issues on 0808 223 1133.

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About Ofgem 

Ofgem is Britain’s independent energy regulator. Our role is to protect consumers now and in the future by working to deliver a greener, fairer energy system. We do this by:

  • Working with Government, industry and consumer groups to deliver a net zero economy at the lowest cost to consumers.
  • Stamping out sharp and bad practice, ensuring fair treatment for all consumers, especially the vulnerable.
  • Enabling competition and innovation, which drives down prices and results in new products and services for consumers.

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Coal falls to single unit in top-up Capacity Market auction that highlights growing pool of distributed generation

The ‘top up’ T-1 Capacity Market auction for next winter closed at £45.

Consumers will pay to underwrite one 435MW coal-fired station – Uniper’s Ratcliffe 4 –  and 6.12MW of diesel generation. But the largest contribution to the capacity contracted was embedded gas engines. Some 93 gas engine sites totalling 986MW won contracts. There was also a contract for EirGrid’s 295MW East-West interconnector.

Solar (12.7MW) and wind (13.5MW) won contracts suggesting that the CM is seen as a viable option to underwrite new plant. The solar owners are Warrington Power and the onshore  wind power contracts, for new-build, were with ScottishPower, Greencoat Wind and Muirhall’s Crossdykes project.

Contracts went to 239MW of demand side response and 114MW of battery storage. Among these Gridserv, Pivot Power, Power Act and Thrive renewables were among those who won contracts for new-build batteries. Tata Steel won two DSR contracts.

The auction results illustrated how far the UK pool of generators has moved on from the small pool of large generators who represented the market in past decades.

Around 53% of the 4240MW that entered the auction won a contract, representing 156 units belonging to 48 parent companies. The relatively small amount of capacity  available in the year-ahead auction brought forward distributed generation specialists and among those winning contracts were   Aggregated Micro Power (Urban Reserve), Amber Energy Storage, Anesco, Bagnall Energy, Conrad Energy Holdings, Eclipse, Kiwi Power, GridBeyond, Harmony, Flexitricity, Limejump (part of Shell) and Zenobe,


Energy firms overcharged one million switching customers

More than one million people were overcharged by energy firms during the process of switching suppliers, the regulator Ofgem has said.

When a customer decides to switch, the rules state they should be protected from price rises while moving – which could take up to three weeks.

Eighteen suppliers made errors leading to overcharging of £7.2m.

They are refunding the money and making extra payments in some cases, taking the compensation total to £10.4m.

The biggest names in the sector – including British Gas, E.On, EDF, Npower, Scottish Power, SSE and Octopus – made the mistakes, with Ovo Energy and Shell the worst offenders.

They failed to protect customers who switched tariffs or suppliers after price rises were set between 2013 and 2020.

Although the average amount overcharged was only £6.27, the sums would be higher for those with the biggest bills, and Ofgem said companies did not have the “adequate arrangements” in place to prevent overcharging.

Several companies had self-reported the issue to Ofgem, which then required all suppliers to check their records.

Anna Rossington, interim director of retail at Ofgem said: “Customers should have confidence in switching and not be overcharged when doing so.

“This case sends a strong message to all suppliers that Ofgem will intervene where customers are overcharged and ensure that no supplier benefits from non-compliance.”

In changes made last year by Ofgem, customers receive automatic compensation of £30 if their switch to a new provider goes wrong.

Payments are made if the switch is not completed within 15 working days. A mistaken switch or a failure by the old supplier to provide a final bill within six weeks also qualify for compensation.


Vattenfall gets green light for 1.8GW Norfolk Vanguard offshore wind farm

BEIS gives nod to huge 1.8GW wind farm proposed by Swedish energy company, as it delays approval for Ørsted’s Hornsea Three project for the fourth time

Vattenfall has been given the all clear to build the mammoth 1.8GW Norfolk Vanguard offshore windfarm off the east coast of England.

Planning consent was granted earlier this week by Business Secretary Alok Sharma, following a decision in June to postpone the decision by a month.

The Swedish energy giant intends to install between 90 and 180 turbines across an area of just under 600 square kilometres located 47 kilometres from the Norfolk coast. The project is expected to generate enough power for roughly 1.95 million homes.

Gunnar Groebler, senior vice-president for Vattenfall’s wind business, said the firm was delighted to clinch planning consent for the development, which is scheduled to come online in the mid-2020s.

“This decision justifies the confidence that we have in the offshore wind sector in Britain, and we’re looking forward to developing the project and benefiting the local community,” he said.

“Decarbonising our economies starts with one of the most essential resources – electricity,” he added. “Today’s news sends a strong signal that the UK is serious about its climate ambitions and is open for business to power a green economic recovery.” 

Vattenfall had previously questioned the government’s plans for the offshore wind sector after suffering a second round of delays to the Norfolk Vanguard project last month.

Norfolk Vanguard’s sister project, the proposed 1.8GW Norfolk Boreas farm, has also been stung by significant delays to the government consenting procedure. In May, the Department for Business, Energy, and Idustrial Strategy (BEIS) extended the examination period by five months to October, citing the cancellation of hearings due to the coronavirus.

Danielle Lane, country manager and head of offshore wind for Vattenfall in the UK, urged the government to speed up its approvals process. “It’s now vital that other shovel-ready renewable and low-carbon projects are also given the go-ahead as soon as possible,” she said. “Delays of even just a month or so can set back big infrastructure developments by years in some cases. The UK has to go much further, much faster, if it’s going to reach its net zero targets.”

Lane stressed that the offshore wind projects promised to deliver a significant boost to the local economy. “Today is also great news for people living locally, who we’ve been working with over the last four years to develop this project,” she said. “They can look forward to a multi-billion pound economic boost, bringing with it hundreds of new long-term jobs, driving forward a green revolution and helping to level up UK opportunities.”

The developer expects Norfolk Vanguard to generate more than 400 jobs in the onshore construction phase and a further 150 jobs once operational, once combined with Norfolk Boreas’ workforce.

Hugh McNeal, chief executive at trade body RenewableUK, commended government’s decision to approve Norfolk Vanguard and urged it to reach a similar conclusion for Ørsted’s 2.4GW Hornsea Three project, which was subjected to further planning delays this week.

“Investments in major clean energy projects like these are great examples of how we can get the economy moving again, and the Secretary of State’s announcement will boost our ability to meet the government’s 2030 target of 40GW of offshore wind,” McNeal said. “The landmark decision on Norfolk Vanguard means the UK is taking a significant step closer towards our net zero emissions target, and confirmation of a positive decision on Hornsea Three will get us there even faster.”

In a blow for the Danish energy developer, BEIS extended the deadline for its decision on the 300-turbine Hornsea Three project to 31 December 2020 for the fourth time on Tuesday.

Sharma confirmed, however, that he was “minded to approve” the project, subject to further information being submitted by the Danish energy company by the end of September. The new decision date, BEIS said, would allow time for further consultations with interested parties after the new information was provided.


BP and Shell Write-Off Billions in Assets, Citing Covid-19 and Climate Change

The moves were seen as a possible turning point as plummeting demand makes big oil companies admit they’re not worth what they used to be.

Two of the world’s largest energy companies have sent their strongest signals yet that the coronavirus pandemic may accelerate a global transition away from oil, and that billions of dollars invested in fossil fuel assets could go to waste.

This week, Royal Dutch Shell said it would slash the value of its oil and gas assets by up to $22  billion amid a crash in oil prices. The announcement came two weeks after a similar declaration by BP, saying it would reduce the value of its assets by up to $17.5 billion. Both companies said the accounting moves were a response not only to the coronavirus-driven recession, but also to global efforts to tackle climate change.

Some analysts say the global oil and gas industry is undergoing a fundamental transformation and is finally being forced to reckon with a future of dwindling demand for its products.

“I think we may look back on this as the turning point, the moment the industry finally started to say that real assets with real dollar figures associated with them are likely to be ‘stranded'”—or left undeveloped—”in a decarbonizing world,” said Andrew Logan, senior director of oil and gas at Ceres, a sustainable business advocacy group that has represented major investors in their engagement with oil companies. “This is a huge turnaround from the industry’s previous stance, which had been that no existing assets were likely to be stranded, that there may be risks in the future, but not in the here and now. That acknowledgment, that the risk is real and it’s here in the present, is a really big deal.”


Almost 40% of households report increase in utility bills since Covid-19 began

Almost 60% of Britons say the overall cost of life has increased during the pandemic, according to a new survey

Almost 39% of people globally say their utility bills, including water, electricity, heating, air conditioning, phone, internet and TV services, have increased since the Covid-19 pandemic began.

This is just one of the findings of the latest global Ipsos survey, which shows a majority of people in 26 countries say the costs of food, goods and services have increased since the coronavirus outbreak started.

Almost 60% of the respondents in the UK believe the overall cost of living has increased during the pandemic.

By region, 75% of people in Latin America were most likely to say costs have risen, followed by 72% of those in the Middle East and Africa – more than a third also said transportation and fuel costs had decreased, as a possible consequence of less travel and lockdown restrictions.

Around 56% of people in Turkey said costs have risen, followed by 52% of Malaysians, 51% of Britons and 50% of Canadians.


Swansea tidal lagoon backers call for Boris Johnson to greenlight project

The chief executive of the Swansea Tidal Lagoon has called for Boris Johnson to give the go ahead to the renewable energy project, saying that the UK will need to use “every green project we can” if it is to decarbonise its energy system.

Currently, the project is waiting for the Department of Business, Energy and Industrial Strategy to approve a decommissioning plan which would allow work to begin on site.

However, if the plan is not signed off in the next eight days, the planning consent for the £1.3bn project will be lost. 

Speaking to City A.M., Mark Shorrock said that the development needed someone in Whitehall to push it over the line.

“We need the Prime Minister to say to Whitehall, ‘I want to do this project – take that decommissioning plan out of the drawer”.

Johnson has previously spoken out in support of the Swansea lagoon, which would power 155,000 homes at least, when he was running to be the leader of the Conservative party.

 “He’s said he wants to see Swansea get going. He has said Britain’s recovery is all about jobs, apprenticeships and long term investment and we have this wonderful project that’s on the cusp of being able to break ground at the end of the week with our global alliance partners”, Shorrock told the BBC.

“We can turn the tide on economic downturn with tidal. We hope the Prime Minister can get behind us.”

Over the weekend the Daily Mail reported that a group of 25 backbench Tory MPs were lobbying business secretary Alok Sharma to push the plan through.

Former party leader Iain Duncan Smith, who is one of the group’s leaders, said that the lagoon was the type of “shovel ready” project the government should be embracing to create jobs after the coronavirus pandemic.

Shorrock told City A.M. that the project presented the government with a chance to develop a world-leading industry in the UK with developments all around the country, thus pushing its levelling-up agenda.

Back in 2017, a review of the project by former energy minister Charles Hendry concluded that moving ahead with the pilot project was a “no regrets policy”.

The Swansea project will support 2,200 jobs, but expansion to a second project at Cardiff would mean a further 11,000 jobs. 

Looking further ahead, a fleet of four Welsh tidal lagoons would lead to 33,500 positions being created and six tidal lagoons across the UK would mean employment for 71,000.

The initial project will require a subsidy of £18m from the government, but the subsequent lagoons would pay for themselves, Shorrock said.

“The national significance is enormous if we get Swansea away. Then we can do it at Cardiff and Colwyn Bay, but not with any subsidy. That’s already £13.7 billion into the UK economy”, he added.

Furthermore, the cost of the energy the lagoons would provide has now been lowered to the point where it is now cheaper than nuclear.

In addition, he said, working with supply chains across the UK would mean that 84p out of every £1 spent on the billion-pound project would be spent in this country.

Shorrock said that he already had a team working on two tidal lagoon projects in France, demonstrating the export value of the proposition.

If it is given the go-ahead, the lagoon will be built by a consortium of some of the UK’s biggest construction companies, including Costain, Atkins, GE and Keltbray.

According to Shorrock, BEIS officials had already approved the decommissioning plan back in March, but the firm is still awaiting proper sign-off. 

A government spokesman said: “Any proposed project like the Swansea Bay Tidal Lagoon must provide value for money for the consumer, which we have been clear about since this project was first proposed. Following extensive analysis, the project did not meet this criteria.”


Council-backed energy firm working with outsourced telesales centres in South Africa

A COUNCIL-BACKED energy company has confirmed it works with six outsourced telesales contact centres in South Africa that have 90 staff allocated to its campaigns.

But Scottish firm Together Energy says it only has one of its own members of staff based in South Africa, with the other 129 located in Clydebank.

Warrington Borough Council is putting £18 million into the company, as well as providing a £4 million loan to it.

Together Energy finished bottom of the Which? energy provider table and has received many complaints from users.

It said it is looking to recruit around 25 members of staff in Warrington and that it recently attended a careers fair in the town to help achieve this aim.

But concerns have been raised from customers following adverts online for vacancies in a South Africa call centre for work on a Together Energy campaign.

However, the issue has sparked a response from the company.

A spokesman said: “We do not have any sites in South Africa.

“We had a customer service function in South Africa to help us with the Supplier of Last Resort volumes which has now been closed and the function moved back to Clydebank.

“We work with six outsourced telesales contact centres in South Africa who have around 90 staff allocated to campaigns for Together Energy including a small sales verification team.

“These companies also sell for many other UK energy suppliers including most of the ‘big six’ energy companies.

“The adverts are for these companies trying to recruit people to work on our campaign.

“They are not our adverts or our employees.

“Our one full-time employee in South Africa manages these relationships and the necessary compliance for these centres.”

The firm says it is not directly recruiting for any field sales agents in Clydebank or any telesales agents in South Africa.

There was also an advertisement online for a national fields associate role in Clydebank to sell Together Energy products.

The spokesman added: “We also work in the UK with two outsourced field sales companies, who sell our tariffs and again recruit for people to sell Together Energy products.

“They are not employed by us and the job referred to is for one of these companies not us.”