Is our energy system run for consumers?

4th Sep 2023

 

I usually get into trouble when I pose such questions, but here goes.

My question today considers whether consumers are really at the heart of our upstream energy system, or are they just an afterthought?

What tempted me into considering this question were two recent media articles – one from the Chief Executive of the CCC, in one of his “how to scare the consumer off net zero” comments (edition 42) – suggesting we heat our homes using off peak electricity and hope they stay warm when we need them to and the electric peak costs soar. The other, a right-wing media commentator who suggested the energy retail market needs the price cap lifting, so that savvy consumers can shop around and get the best unit prices in a free market. He made the case that those who do not shop around, should not be protected by Ofgem.

Now I understand the logic of smart unit pricing and it makes economic sense to use energy when the price is low. But how do we protect those that don’t have the flexibility to change their lifestyles to suit this energy market? And for every off-peak pricing benefit, there will be a peak time pricing penalty. How do we ensure fairness in the market to allow for those with inflexible lifestyles?

To the free market commentator, my concerns over their argument is similar. They argued that the “lazy consumer” who did not shop around and engage deserves to be penalised by not having the lowest energy prices. Now that’s fine as a principle if you have the ability and resources to interact with the market but what about those that don’t? Do we leave the decision to Ofgem on who are the “deserving” and “undeserving” of protection? And let’s not forget the price we are all still paying for the failed “switch supplier” experiment.

That’s why “universal” approaches deserve consideration. They may not lead to the most efficient allocation of resources but they make up for it by being fair. In our world, a single unit price for energy consumption regardless of when it is used avoids those difficult questions. If only we could make one work for the consumer, just like, you know, the gas retail market does.

 

 

 

 

 

Mike Foster

EUA's Chief Executive

 

Recent Blogs