The Utility Regulator has taken onboard the concerns expressed by the business community and has decided to initiate an inquiry into how suppliers have communicated with and set charges for business electricity customers.
The announcement follows a discussion with business customers on Friday 6th November held at the Utility Regulator’s office. The discussion covered the underlying factors influencing electricity costs and the Regulator’s policy on network cost allocation.
The inquiry will focus on:
1. Distribution of and communication from electricity suppliers to business customers in regard to the £100million Public Service Obligation (PSO) rebate.
2. Hedging arrangements offered by electricity suppliers to business customers and the extent of uptake.
3. Transparency and understanding of the underlying costs incurred by electricity suppliers.
The Regulator will begin its inquiry with immediate effect and expects to reach a conclusion by early 2010 when it will communicate the outcome of the exercise to the business community.
In addition, while the Regulator is of the view that there is limited scope to further reduce the forecast PSO costs, a commitment has been made to consider the potential and merits of re-profiling these costs over different time periods. This exercise will commence immediately and the findings will be published as soon as possible.
Background information
(1) Although certain costs, like network charges and the PSO levy are regulated, the electricity bills of business customers are also affected by choice of supplier, duration of the contract with the supplier, energy cost hedging strategy and energy demand profile.
(2) This inquiry has been prompted following contact from the business community and the discussion at the business briefing on 6th November when several themes emerged. Specifically:
- There appears to be a lack of clarity for some business customers on the underlying costs incurred by their electricity suppliers. A better understanding of these costs should help customers negotiate better deals.
- While the Regulator communicated to electricity suppliers that a nine month £100million PSO rebate would come to an end on 30th September 2009, it appears that this may not have been clearly communicated by electricity suppliers to some customers.
- The specific hedging arrangements in place for a business customer prior to the 1st October 2009 will have materially influenced the extent of any price change from that date.
(3) To view the presentation given at the 6th November briefing, click here