Electricity prices must be right for small businesses
Just one year ago, the Utility Regulator decided to remove price controls on the supply of electricity to small businesses. The decision was justified, in part, by the expectation that the supply of electricity to these businesses, large and small, was now subject to a proven competitive market. Previously, small businesses were protected by the same system of price controls as continues to apply to domestic households.
Now the Regulator has re-opened the debate about whether, and how, small businesses do merit some forms of regulatory control, other than price controls.
Interestingly, the Regulator continues to focus on smaller businesses but leaves the largest businesses to contract for electricity relying on competition between suppliers.
That assumption has created another question for policymakers (which they are reluctant to accept) about the merits of assistance for the 20 largest electricity users who pay higher prices than in GB.
The Regulator is consulting on proposals to intervene in the marketplace to benefit smaller businesses. As the Regulator says: “These measures are not to remedy any particular harm per se, but rather are positive and proactive measures to improve the operation of the small business market … they already exist in the domestic market and are not novel.”
There are six main proposals out for consultation.
1: A requirement on electricity suppliers to publish tariff rates, including their acquisition and retention rates. The suppliers have disagreed saying that businesses could shop around to get competitive rates and that specific publication details could be difficult and costly. The Regulator disagrees and quotes the GB comparable decision in support of the benefit of increased transparency.
2: Suppliers might seek up front deposits from business customers and should specify how the cost of deposits should be calculated? The Regulator supports the publication of deposit requirements as an aid to transparency and the setting of deposits calculated on the basis of an estimated three months’ consumption. The Regulator goes on to commend that deposits should not be held indefinitely but handed back after a set period, possibly up to 12 months.
3: Should rollover contracts be banned? The Regulator notes that (in contrast to recent history in GB) rollover contracts are not an issue in NI. However, the Regulator, taking the opinions of electricity suppliers, believes that it may be appropriate to prohibit such continuing, or sequential, contracts.
4: Exit fees for the termination of a supply contract are a possible check on customers who, by an early exit, cause additional cost or inconvenience to a supplier. The Regulator proposes that exit fees should be set at a reasonable level and the level should be approved by the Regulator. Interestingly, the Regulator does not quote any current examples of the practice of charging exit fees.
5: The Regulator explores, inconclusively, the possible introduction of prepayment meters for small business customers. The possible theoretical merits are outlined but there remain questions about whether a viable methodological solution can be found. No recommendation is made but further stakeholder advice and opinions are sought.
6: Other possible regulatory measures considered were:
• A duty to offer terms: difficult to implement, not taken forward
• A ‘cooling off period’: would cause difficulty for suppliers, not suggested
• Transparency of T&CS: possible requirement that customers should have 21 days’ notice if there is a contract change: opinions sought.
• Mandatory statement on bills of available alternative tariffs: opinions sought.
There will be some surprise that the merits of these proposed new minor regulatory requirements for small businesses are so high on the Regulator’s current agenda!
Perhaps the Regulator might consider clearer public statements on how price changes are justified (when they occur) showing the quantitative underpinning of (previously) unexplained changes. Is this an opportunity to suggest a reconsideration of priorities for a public communications strategy?
Price controls on electricity were scrapped