We are six

The Cornwall Energy hosted independent supplier forum has just met for the sixty-fourth time, which is a good a point as any to explain a bit more about it.

Seeing a need in the market we established our independent supplier forum six years ago. It seems like only 72 months ago that the first meeting took place in January 2004 and we are glad to report that it is going from strength to strength. The purpose of the forum is to allow members and ourselves to disseminate and discuss changes (proposed and actual) to policy, regulation and legislation and how they may impact on smaller suppliers. The forum is not a representative body or a lobby group—although we of course make sensible submissions on behalf of this constituency when it is agreed appropriate.

Since its inception membership has grown to include a wide section of the independent supplier community. Unlike the Big Six, members of the forum may operate in the household or business sector only, gas or electricity and may, for example, specialise in green energy or low-cost offers. Of course this diversity is good as it demonstrates to us where market 'imperfections' may exist (and may not be in the interest of other parties to pursue). The monthly meetings also allows for industry bodies (recent examples include National Grid, DECC, Ofgem and APX) to come and present findings or proposals to the smaller supplier community. Resource constraints mean you are unlikely to find such a concentration of independent suppliers in one place—unless it’s in a queue seeking credit cover…

During this time the market has been through considerable ups-and-downs. In 2004 the wholesale power market was rebounding from its collapse 18 months earlier, energy prices were roughly 40% lower, Cambridge United were still a league team, fuel poverty figures were half today’s level and we had only seen a mere two energy white papers. Conditions today may be different but what has not changed significantly is the tenacity required to establish, maintain and even grow a supply business. Indeed we have been unfortunate enough to have lost a few members due to the tough market circumstances. And it is experiences such as these that drive us to offer (hopefully) pragmatic critiques, responses or proposals to make the market a fairer and simpler one to enter and operate in.

From a small supplier perspective there have been some positive moves from Government and the regulator of late. The price probe was a long overdue assessment of the retail market, and as importantly its linkages with wholesale markets. On the whole most of the remedies that have fallen out of this investigation should see improvements in customer relations and a better understanding, and transparency of wholesale markets—although we reserve judgement on a couple, such as the increased accountancy information obligations on the Big Six. The review of code governance, which is coming to its conclusion, is another area that should bring some benefits to new entrants and smaller market participants. What may need to be given some consideration soon though is the arbitrary definition of a smaller supplier used throughout the industry. Presently smaller suppliers in the household sector are exempt from many initiatives if they have less than 50,000 customers. The list is growing (and is likely to increase substantially) but includes the Community Energy Savings Programme, the Carbon Emissions Reduction Target and the soon to be introduced Feed-in Tariff Levy. While it is sensible to permit exemption for smaller suppliers from these schemes, to encourage new entrants and allow them to grow, we wonder if greater consideration should be given to reviewing this apparently arbitrary limit lest it cap growth and prevent any company every challenging the Big Six competitively.

It would be inopportune not to describe the range of topics covered during a typical forum meeting. We usually provide detailed updates on three hot topics, recent examples being the impact on members of the common distribution charging methodology project, the fifth distribution price control review, and the introduction of feed-in tariffs. But there remains plenty of space on the agenda to discuss code governance developments, track the transmission access review, smart metering, the latest White Paper and new licensing obligations—among others. And there are two reasons driving the need for this wide range of information: members have specific and diverse areas of the market that particularly interest them and the market continues to rapidly evolve. The pace of regulatory change coupled with volatile costs (be they driven by illiquid markets, penal cash-out rules, changing network charges, increasing number of levies or credit) means that in general smaller suppliers, who do not have a sizeable fraction of non-switchers in their customer base, simply cannot afford to take their eye off the ball.

For more information on the forum please contact us.