Corporate report

Energy

Published 25 November 2016

CMA recommendations

Introduction of locational pricing for transmission losses

(1) Ofgem to support National Grid in implementing the Order.

(2) Ofgem and industry to consider long-term alternatives to the Order, based on the full marginal pricing of transmission losses.

Changes to the approach to allocating Contracts for Difference

(3) DECC (now the Department for Business, Energy & Industrial Strategy (BEIS)) to undertake, and disclose the outcome of, a clear and thorough impact assessment before awarding any Contracts for Difference (CfDs) outside the CfDs auction mechanism.

(4) DECC (now BEIS) to undertake and consult on a clear and thorough assessment of the appropriate allocation of technologies and CfDs budgets between pots.

Range of measures to address weak customer response

(5) Ofgem to establish an ongoing programme to identify, test and implement measures to promote customer engagement.

(6) Ofgem to modify gas and electricity suppliers’ standard licence conditions obliging suppliers to participate in the Ofgem-led programme of testing and implementing measures to promote customer engagement.

(7) Ofgem to create, operate and maintain a secure cloud database for the purposes of holding the Domestic Customer Data. ^{[footnote 1]}

(8) DECC (now BEIS) to make changes to the current specifications of Midata phase two to:

• make participation mandatory for all gas and electricity suppliers;

• expand the scope to cover meter type, Warm Home Discount Indicator, consumption data and time-of-use for those customers on Economy 7 meters or other time-of-use tariffs; and

• give third party intermediaries (TPIs) the ability to seek customer consent on the frequency with which they can access the customer’s data through Midata, and to send updated tariff comparison information based on any subsequent access granted to a customer’s Midata. TPIs should be required to present at least two options to customers when seeking consent to access Midata, including one option for access on an annual or ongoing basis, and another option for access on a specified frequency.

Measures to address competition issues in the prepayment market

(9) Ofgem to modify standard licence conditions to allow suppliers to set prices to customers on dumb prepayment meters without applying regional cost variations (and de-prioritise enforcement pending modification).

(10) Ofgem to take responsibility for the efficient allocation of gas tariff pages.

(11) Ofgem to take appropriate steps to ensure that changes to the Debt Assignment Protocol are implemented by the end of 2016.

Measures to address barriers to competition created by elements of Retail Market Review reforms

(12) Ofgem to modify standard licence conditions to remove aspects of ‘simpler choices’, including the ban on complex tariff structures, the four-tariff rule, restrictions on the offer of discounts, bundled products, and reward points, and the requirement to make all tariffs available to both new and existing customers.

(13) Ofgem to introduce an additional standard of conduct that will require suppliers to have regard in the design of tariffs to the ease with which customers can compare value for money with other tariffs they offer.

(14) Ofgem to remove the whole of the market requirement in the Confidence Code and introduce a requirement for price comparison websites accredited under the Confidence Code to be transparent over the market coverage they provide to energy customers.

Measures to address technical and informational issues in the gas settlement regime

(15) Ofgem to ensure timely and effective implementation of Project Nexus.

(16) Ofgem to ensure all non-daily metered supply points submit valid meter readings to Xoserve (at specified frequency).

(17) Ofgem to take appropriate steps to ensure that a performance assurance framework for gas settlement is established within a year of the CMA’s final report.

Measures to advance introduction of half-hourly electricity settlement

(18) Ofgem to analyse costs and benefits of the move to half-hourly settlement, including options for reducing the costs of elective half-hourly settlement, and the cost-effectiveness of alternative design options for half-hourly settlement.

(19) Ofgem and government to jointly publish and consult on a plan for implementation of half-hourly settlement.

(20) Government to consider removing restrictions on data collection and sharing which would support half-hourly settlement.

Range of measures to address microbusiness weak customer response

(21) Ofgem to establish an ongoing programme to identify, test and implement measures to promote customer engagement.

(22) Ofgem to create, operate and maintain a secure cloud database for the purposes of holding the Microbusiness Customer Data. ^{[footnote 2]}

Measures to strengthen governance of the energy market

(23) Government to increase prominence of role of competition in Ofgem’s statutory objectives and set up a clear and established process for Ofgem to comment on legislation relevant to Ofgem’s objectives.

(24) DECC (now BEIS) and Ofgem to publish detailed joint statements on government policy objectives which will require Ofgem interventions.

(25) Ofgem to publish an annual state of market report, establish a new office of chief economist, improve the financial reporting requirements on the six large energy firms, and ensure that any price monitoring regime measures wholesale energy purchases on a relevant basis, such as opportunity cost.

Measures to strengthen Ofgem’s oversight of the industry code modification process

(26) Government to grant Ofgem powers to modify industry codes in certain exceptional circumstances and make code administration a licensable activity.

(27) Ofgem to implement measures to increase its oversight and ability to intervene in code modification processes.

Recommendation to consumer body

(28) Citizens Advice to provide information and support to domestic electricity customers on restricted meters.

Response

Ofgem has accepted all CMA recommendations - its response to the CMA’s package of remedies was issued on 3 August 2016. See Ofgem’s implementation plan for the remedies package.

Citizens Advice has accepted the CMA’s recommendation and is working with us to provide support to restricted meter customers.

Government/DECC/BEIS have not responded to CMA recommendations.

Footnotes

1. Domestic Customer Data comprises information on customers’ names, addresses, current supplier, meter type, name of current tariff, annual energy consumption, and meter numbers, for all customers who have been on an energy supplier’s default tariff(s) for three or more years. ↩

2. Microbusiness Customer Data comprises information on microbusiness customers’ business names, addresses, current supplier, name of current contract, annual energy consumption, and meter numbers, for all customers who have been on an energy supplier’s default contract(s) for three or more years. ↩