Ofgem defends the price cap as working well since its introduction in 2019, protecting customers from the worst of volatile, post-Ukraine wholesale power markets.  Reformulations have included a temporary ban on acquisition-only tariffs, stopping suppliers from penalising inattentive customers.

Around half of UK homes were covered by the price cap when it launched.  Bills rocketing in consequence of Covid & of Putin’s war in Ukraine have pushed that share to over 90 per cent now.

The watchdog says a power sector increasingly dominated by renewables and smart technologies favouring flexible, time-shifted consumption, are already speeding up changes in home usage behaviours.  Growing numbers of homeowners generating onsite, operating  batteries, charging EVs or using heat pumps more and more call the cap’s present scope into question.

With waves of households set to adopt time-of-use tariffs, the watchdog says devising a universal price cap is getting trickier for policy makers as much as suppliers.

Half hourly settlement set to arrive next year as an option for home consumers will inject yet more variety into how Britain’s residences use electricity, the body recognises.

Ofgem’s discussion paper today on the future of price protection follows D-ESNZ’s call in February for evidence (CFE) on default tariffs.

The regulator’s suggested options for the price cap’s evolution include:

• making it more dynamic, capping time-of-use unit rates to encourage consumer flexibility
• introducing a targeted cap, reflecting factors such as customers’ financial vulnerability
• opting for more market-based protection, such as setting a limit between a supplier’s default tariff and other rates
• capping suppliers’ profit margins, or
• replacing the cap with a ban on acquisition-only tariffs

Today’s consultation ends on 6 May.  Its proposals are part of Ofgem’s wider work to review how the retail market for home energy is set up, ensuring it favours all consumers including those who struggle the most to meet bills which have trebled or worse since Britain emerged in 2021 from Covid.

Last month the watchdog issued its call for input to examine issues around affordability and debt in the energy market.  It is also reviewing 30,000 responses to a call for opinions on standing charges which closed in January.

Ofgem’s director of retail Tim Jarvis said: “While the price cap played an important role in protecting consumers from the loyalty penalty that existed before its introduction, the energy market is changing as we move to Net Zero. We recognise the systems we have in place may need to change too.

“We’re considering how a wide range of future consumers will use and pay for energy, to make sure we develop the right measures that will protect and benefit consumers across the board.  Our aim is ensure the market works for everyone”.

In related assessments, Ofgem will review over the next two years whether its supervising rules need to levelise bad debt charges between direct debit and standard credit customers. Also flagged for review are changes in suppliers’ operating costs and how these are reflected in the price-cap level.

In February D-ESNZ published its own appeal for input, exploring how default tariffs may evolve as the market changes.

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Three more sites will benefit from PV before July, adding over 2,600 new panels this financial year to the chain’s parc of installed PV panels, towards an intended yearly output of over 930MWh.

The planned expansion adds to on-roof arrays installed already on the chain’s Leicestershire HQ, plus its stores in Swansea, Derby, Romford and Bristol.

Across its portfolio of over 150 outlets, Dunelm says it sourced 99.7 per cent of its power from renewable sources in the last financial year.

The retailer’s property director Steve Barton declared: “We’re very proud to be stepping up the solar panel roll-out in line with our ambition to reach net zero by 2030.”

“The investment comes in support of Dunelm’s greenhouse gas emissions targets, which were approved by the Science Based Targets initiative last autumn

Within a broader target to reach Net Zero emissions by 2040, Dunelm has in addition committed to an SBTi-validated near term target to halve absolute emissions from Scopes 1, 2 and 3 against a 2019 benchmark by the same deadline.  By 2040, it has a goal to cut Scope 1, 2 and 3 emissions by 90 per cent.

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The move stands to save consumers a notional £426 annually, even as the cap replaces the Energy Price Guarantee, the government’s emergency subsidy. Since October that has pegged a hypothetical average household’s annual bill at £2,500 a year.

Ministers and the regulator stressed that the cap’s reduction will mean customers on default tariffs paying less for energy for the first time since global gas prices rose in late 2021, driven by world demand rebounding after Covid lockdowns.   Sanctions on Russian gas after the February 2022 Ukraine invasion further tightened the upward screw.

Falling wholesale prices of gas have enabled the regulator’s decision.

It also heralds likely renewed competition between suppliers, offering competitive fixed price deals for the first time since the energy crisis began.

Business and enterprise users remain cushioned only by the Energy Bills Discount. Its support was revised downwards in April from the more generous Energy Bill Relief scheme.

At its peak, Ofgem’s domestic cap had stood at £4,729.  With the new cap still more than double its pre-Covid levels, the regulator warned though that many households would struggle to meet even lower bills.

Ofgem chief executive Jonathan Brearley said more focus will be needed for government, the regulator and the industry to support the most vulnerable groups this winter.

He added: “After a difficult winter for consumers it is encouraging to see signs that the market is stabilising and prices are moving in the right direction.

“However, we know people are still finding it hard, the cost-of-living crisis continues and these bills will still be troubling many people up and down the country. Where people are struggling, we urge them to contact their supplier who will be able to offer a range of support, such as payment plans or access to hardship funds.

In the medium term the Ofgem boss foresees no return to retail energy prices paid before the crisis first bit in 2021.

“We believe it is imperative that government, Ofgem, consumer groups and the wider industry work together to support vulnerable groups.

Anti-poverty campaigners stressed that the reduction left many homes still facing eat-or-heat dilemmas every day.  The charity National Energy Action said it would still leave 7.5 million households in fuel poverty, unable to heat homes adequately.  In October 2021, that figure stood at 4.5 million.

Citizens Advice, identified in law as representing consumers on energy prices, was equally wary. Its head Dame Clare Moriarty pointed out the cap’s cut to £2,074 is nearly double what average domestic bills were as recently as 18 months ago.

“The fall in the price cap provides some desperately needed respite”, said Moriarty. “But energy bills will still be unaffordable for millions of households”.

“For many, life is getting worse, not better. Year on year we’re breaking records for the number of people struggling with energy debt.  It’s clear more government support will be needed in the future for struggling households.”

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This follows an announcement made earlier in the year where twenty major retailers signed a declaration to develop the Climate Action Roadmap to tackle the causes of climate change. The BRC believes that with support from Government, the retail industry can decarbonise stores by 2030, deliveries by 2035 and products by 2040.

The Climate Action Roadmap sets out five areas of action:

• Putting decarbonisation at the core of all business decision making
• Reducing carbon emissions from shops and distribution centres
• Moving to net zero logistics operations
• Increasing sustainably sourced products
• Helping customers and employees to live low carbon lifestyles

By 2040 the British public can expect to buy or rent products knowing they have minimal impact on the climate. The future is exciting, from algae-based carbon-absorbing clothes; shops and cafes powered by energy captured from customers’ footsteps; to drone delivery and even products ‘printed’ at home by 3D printers. The opportunities to reduce carbon emissions in retail are huge.

However, for this vision to be realised, and for the UK to be a global leader in the transition to a zero-carbon world, the retail industry and Government must work in partnership.

The roadmap builds upon the Better Retail Better World campaign whereby retailers are leading the charge to meet some of the biggest global challenges of the coming decade. The launch of the Climate Action Roadmap begins a twenty-year journey through which the industry will combat climate change and help customers live low carbon lifestyles. The plans for the roadmap will be outlined in detail at the UNFCCC Race to Zero Dialogues on 10^th November 2020.

Helen Dickinson OBE, chief executive of the British Retail Consortium said, “By 2040, we want every UK customer to be able to be able to make purchases – in store and online – safe in the knowledge that they are not contributing to global heating.”

Chris Stark, chief executive of the Committee on Climate Change said, “Through the BRC Climate Action Roadmap, retailers are setting a world-leading industry ambition to reach net zero emissions. It’s a fundamental goal, requiring bold leadership from government and from commerce – I highly commend each retailer who supports this initiative.”

Gareth Redmond-King, head of climate change at WWF said, “Business has a huge role to play in tackling the climate crisis – every business leader must decide urgently whether they are working towards a 1.5 degree future, and stand up and be counted. The BRC and its members are leading the way with this bold commitment. As customers, let’s show our support to the businesses making this commitment. And as citizens let’s call on government to work with the BRC and other corporate leaders to help deliver on it, and bring other businesses along with them.”

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