The regulatory changes your business needs to know about.

Brexit, ETS (Emission Trading Scheme), CMA (Competition and Markets Authority) – the minefield of political and industry movements can be enough to confuse even the most diligent energy market watcher. Yet changes in policy and regulation often have a direct or legally-binding impact on business operations, accounting and record-keeping.

New Government department
Following the formation of a new Government under Prime Minister Theresa May, DECC will be merged into BIS, creating the new Department for Business, Energy and Industrial Strategy (BEIS). The rationale for such a significant departmental change is that this will allow better policy formation due to the natural overlap between energy, infrastructure, industrial policy, supply chain and enterprise. This move indicates that the focus on UK content, job creation and benefits for UK Plc will be the defining objectives of this merger. All existing functions of DECC will continue in the new department. The creation of BEIS has been welcomed by key stakeholders such as, CBI, Policy Exchange and Committee on Climate Change (CCC).

The creation of the new Government department will require a tremendous amount of reorganisation of governance, structure, administration and human resources. The greatest impact from the Government restructuring could lead to a potential policy formation hiatus in in energy in the short- to medium-term.

Cost exemptions for energy-intensive industries
Much has been made of the Government’s plans to relieve energy-intensive industries (EIIs) such as steel and heavy manufacturing from the cost of the Renewables Obligation (RO), Feed-in Tariff (FiT) and Contracts for Difference (CfD), which aim to give those sectors more long-term certainty around energy costs and help them to stay competitive internationally. Under the new proposals – expected to be in place by April 2017 subject to legislative change and EU State Aid approval – the current Government-funded rebate would be replaced by an exemption from the charge altogether. The Government has proposed exempting EIIs from up to 85 per cent of levies associated with the promotion of renewable energy sources.

Obviously the potential for cost savings is good news for those industries, but the cost of that portion of RO and FiT charges will have to be covered by the rest of the market. That would see the cost of the exempted charges spread amongst fewer customers, potentially increasing costs for smaller businesses and domestic customers. At E.ON, we’ve reviewed the RO and FiT forecasts and we believe the impact on larger customers may be in the region of a six per cent uplift in the cost of RO and FITs on bills.

Following on from the last consultation which focused on exempting EIIs from RO and FiT, the new department responsible for energy – Business, Energy and Industrial Strategy (BEIS) – extended the consultation on these plans. The impact assessment (p27) predicts that exemption of CFDs for EII will result in bills for Medium Energy Users being £4,439 higher in 2020 (2016/17 prices).

It is really important that your supplier provides transparent quotes invoices, so you know exactly what they’re paying for and how suppliers quote for non-energy costs. Speak to your Account Manager to see if your bills are going to be affected and if you need further explanation on your invoice breakdown.

Impact of Brexit
Following June’s referendum decision, the House of Commons Energy and Climate Change Committee (ECCC) announced it would hold an inquiry exploring the implications on UK energy policy of leaving the EU. The panel of MPs has invited written submissions on what the Government’s priorities on energy should be when negotiating the UK’s exit from the EU. They are also seeking views on what aspects of EU-led energy policies and legislation should be retained.

In addition, the ECCC is holding a hearing on the implications of leaving the EU on climate policy. This will look at questions concerning Britain’s future approach to issues like the EU ETS. The ETS requires companies to purchase permits to emit greenhouse gases, and Britain’s participation in it will now be subject to negotiation between the UK and EU.

Written submissions to the inquiry on energy policy should be submitted by 14th September. You can file evidence online via the relevant Committee web page.

State of the energy market
The Competition and Markets Authority (CMA) has published its final report on competition in the energy market. The report confirms in large part the provisional remedies issued by the CMA in March.

The intended outcome of the investigation is to increase competition and reduce costs for small firms and consumers with such measures as:

• Increase the ability of all small business customers on auto-rollover contracts to switch contracts or suppliers – contract negotiation window should be extended and suppliers are not allowed to lock in customers with termination fees and no-exit clauses;
• Allow rival suppliers and third party intermediaries access to details of small business customers on default tariffs for three years or more so they can be targeted with potentially cheaper energy supply contracts;
• Make business suppliers disclose all available tariffs to the smallest micro business customers on their websites or through a price comparison website, allowing these very small business customers to compare market prices – the hope is this will lead to growth of price comparison websites as in the domestic market, driving down prices;
• BEIS & Ofgem to drive forward a plan to implement half-hourly settlement to all small businesses potentially giving business an ability to pay less for energy by using it outside of peak times.

Local heat funding
A government consultation was launched on how best to deploy funding for low carbon heat in UK towns and cities. The call for evidence on the Heat Networks Investment Project (HNIP) was seeking views on who should be eligible to apply directly for the money, what form this funding should take, and the criteria that should be used to assess applications for funding. Under an initial pilot, the funds will be limited to local authorities and a select number of public bodies. BEIS is currently analysing the feedback.