Elec­tric­ity prices must be right for small busi­nesses

Belfast Telegraph - Business Telegraph - - Business Telegraph - with John Simp­son @bel­tel_busi­ness

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

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