PES Energy News – 20 February 2023 Table of contents:

01 – Energy market braces for ‘millions of supplier switches’ – Consultants have predicted that energy switching could skyrocket from July as the pressure on energy prices eases

02 – Ofgem to almost double Covid cost allowance for energy suppliers – The move is expected to recover some of the energy debt created during the pandemic

03 – UK’s low carbon and renewable energy economy jumps by a third in a year – Gross revenue and employment rate in these sectors are at the highest level since 2015, the ONS has said

04 – “Almost certain that Treasury will delay the increase in Energy Price Guarantee” – Typical monthly bills of prepayment meter customers 04 are on course to rise by 22% from March to April, new analysis suggests

05 – EU gas price cap comes into force – The measure, designed to protect against future price spikes, will kick in if prices breach 180? per megawatt hour for three days running

01 – Energy market braces for ‘millions of supplier switches’

Energy switching activity across the UK could soar exponentially from July as suppliers are predicted to be able to offer more competitive deals to customers.

Using the average switching rates from the two years up to October 2019 as a baseline, consultancy Cornwall Insight has estimated that, approximately 5.5 million switches that might have been expected to take place did not occur.

The report suggests this is an indicative figure of how many households may be ready to change their supplier when new energy deals will start beating the standard variable rates.

With the level of the Energy Price Guarantee set to rise to £3,000 in April and decreasing wholesale prices predicted to lower supplier costs, experts believe that suppliers will be able to offer fixed tariffs that compete with the capped government prices.

Just a few days ago, ElectraLink reported that energy supplier switching activity last year was 62% less than what it was in 2013.

02 – Ofgem to almost double Covid cost allowance for energy suppliers

Britain’s energy regulator has said it will almost double the allowance given to energy suppliers to recover some of the bad debt costs from the Covid-19 pandemic.

The move is expected to increase consumer bills.

The pandemic left many customers not being able to afford their energy bills in full – this led to additional debt-related costs for energy companies.

These debt-related costs have increased since Ofgem’s first estimates and therefore the regulator has decided to set an additional adjustment allowance worth £12.02, taking the amount to £30.01 per typical dual fuel credit customer.

This is expected to be recovered over 12 months from April 2023 to March 2024 through the price cap.

Ofgem said: “We have concluded that it is in customers’ interest to allow suppliers to recover the additional debt-related costs related to Covid-19 from April 2023. We consider that these costs were efficiently incurred due to the unforeseen and unprecedented impact of Covid-19 on some customers’ incomes.

“Our decision will help ensure that suppliers have the finances to continue to supply energy to their customers and fulfil their licence obligations.”

03 – UK’s low carbon and renewable energy economy jumps by a third in a year

The UK’s low carbon and renewable energy economy (LCREE) generated £54.4 billion in turnover, an estimated 30.8% increase since 2020.

The national statistics agency has presented earlier today its estimates regarding the growth of the LCREE.

It said this growth accounted for the employment of 247,400 full-time equivalents, which was a 16.4% increase since 2020.

The Office for National Statistics added that turnover and employment rates are both at their highest level since the first comparable figures in 2015.

It also suggests the energy efficient products group had the highest LCREE turnover in 2021 at £19.6 billion and the highest LCREE employment at 138,300.

Pete Chalkley, Director at the Energy and Climate Intelligence Unit, said: “The net zero economy is most pronounced in levelling-up areas like Teesside, Merseyside and the Humber with jobs paying on average around £10,000 more.

“Given the US and the EU are now in an arms race to claim green industries, the question is does the UK have the plan to compete?

“The UK’s electric vehicle industry grew significantly over this period, but jobs are on the line if we fail to move with the times. We’ve been left with a rusting car industry once before.”

04 – “Almost certain that Treasury will delay the increase in Energy Price Guarantee”

The Treasury can and almost certainly will delay the increase in the Energy Price Guarantee (EPG) for three months.

That’s the key message conveyed in new analysis by the think tank Resolution Foundation which estimates that such a move could increase the cost of the scheme by £3 billion but still leaves more “significant savings”.

Last Friday, speaking to broadcasters, the Chancellor highlighted the need to be “responsible with the public finances”, hinting at the government’s decision to stick to the rise in the EPG to £3,000 from April.

The authors of the report estimate that the “most acute problem” will arise for those on prepayment meters who are likely to see their monthly bills rise by 22% from March to April if the increase in EPG moves forward.

Resolution Foundation said: “Falling wholesale prices knocked 90% off the estimated cost of the EPG next year. Even if the Chancellor chooses to iron this temporary bill rise out, the cost of the EPG in 2023-24 will still have fallen by around two-thirds since last November.”

A HM Treasury spokesperson said: “Wholesale prices falling is good news, but as we have all seen, prices are volatile and can increase as fast as they fall. If prices return to their late August level, the government would need to borrow an extra £42 billion and potentially increase taxes to continue funding the EPG at current levels.”

05 – EU gas price cap comes into force

An EU regulation on a gas price cap has come into effect.

Two months ago, EU energy ministers agreed on a European Council regulation that sets a market correction mechanism to protect households and businesses against excessively high prices.

The measure, which is temporary and will apply for one year, aims to limit episodes of skyrocketing gas prices in European countries that do not reflect market prices while ensuring the stability of financial markets.

The market correction mechanism is expected to be automatically activated if the monthahead price on the Title Transfer Facility (TTF) exceeds 180€ (£160)/MWh for three working days; the month-ahead TTF price is 35€ (£31) higher than a reference price for liquefied natural gas on global markets for the same three working days.

The Agency for the Cooperation of Energy Regulators will monitor the markets and if it observes that a market correction event has occurred, it will publish a ‘market correction notice’ on its website.

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