Last week, Current± ran its latest webinar in its Briefings series, pulling together an expert panel to discuss the Energy Price Guarantee.
It followed on from the government unveiling a cap on electricity and gas unit prices from October in an effort to protect customers from the surging wholesale energy prices.
Current± was joined by:
- Simon Skillings (SS) senior associate at E3G
- Stuart Dossett (SD) senior policy adviser at Green Alliance
- Robert Buckley (RB) head of relationship development at Cornwall Insight
- Rachel Hayes, associate director at Regen
The Energy Price Guarantee has been broadly welcomed as a short term measure by the energy sector, a stance our panellists agreed with, as the need for the new government led by Liz Truss to act, and act fast, was clear.
But a host of questions remain, not least how it impacts the transition to low-carbon energy sources, influences policy and regulation over the next two years and how REMA may affect it.
While our panel answered over a dozen questions, as the session came to a close many remained in the chat box. So, Current± caught up with them after the session to put some final, key questions to them.
In light of the essential public service that retail/supply companies provide, and subsequent increased public interest for energy nationalisation, is there scope for bringing certain aspects of the industry into public control, and if so, which ones?
SS: Public control is provided through effective regulation and is a separate issue from ownership.
Ownership drives the costs of finance and the risks that the business is prepared to take. Therefore, the question of nationalisation relates to the ability to access cheap finance and the need for innovation. Both are important.
The key point is that public/private ownership is not a binary choice. We will inevitably be in the situation where Governments underpins certain business risks and have a de-facto financial stake. In terms of outcomes, effective regulation is far more important.
EV charging at home will be subject to the Price Guarantee, but not if we use public chargers? Will there be any specific help for public EV companies to reduce their wholesale costs?
SD: Both public and private EV charging will be covered by support schemes. EV charging at home will be covered by the Energy Price Guarantee and companies offering public charge points will be covered by the Energy Bill Relief Scheme.
VAT however is levied at 5% for those charging at home and 20% for those using public charge points. The government should reduce VAT rates to 5% for public EV charging, for consistency with private charging and to support EV uptake among those without driveways.
How fair is the winter business rate relief for organisations that had already fixed for the longer term?
RB: There will be allowance made for those who contracted for fixed price contracts after 1 April 2022 but before now so they are included in the scheme.
Likewise there is provision for flexible contracts. The full guidance is here.
Do we have any details about the non-commodity prices for the business-focused relief scheme? If I have understood what I read correctly, 21p/kWh is lower than the retail tariff rate that it is to be tied to. Is this relating to the total tariff or the commodity price?
RB: The domestic Energy Price Guarantee and the business Energy Bill Relief Scheme are based on equivalent measures of wholesale cost. The business scheme has a wholesale power baseload cost of £211/MWh, while the domestic scheme has a “floor” unit price of £340/MWh.
The reason for the difference between the two numbers is effectively the costs of policy (although the scope of policy costs for both user types is different). Businesses will continue to pay policy costs, with the lower wholesale price compensating them for this as compared with domestic users.
Can you comment on your view in terms of how this will impact the (not just on the short-term) inflation?
SS: Across Europe, the desire to control inflation is one of the key drivers behind measures to cap energy prices. Lower energy cost increases will inevitably lead to lower inflation, but cause and effect are complicated and I would not like to predict the precise relationship.
Which elements of pass through will remain and which will disappear? Thinking of ‘green levies’ that are supposedly being removed
SD: The social and environmental levies have been moved off electricity bills and into government spending for the duration of the Energy Price Guarantee.
The benefits of low carbon electricity generation, namely payback from CfDs, will continue to reduce consumer bills. The costs from energy supplier failures will continue to be funded through standing charges for electricity and gas.
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