Posted on: 22/11/2013
Independent energy firm SmartestEnergy has warned that extra burdens placed on suppliers under EMR could hit smaller players hardest.
Chief Executive Robert Groves told Energy Minister Michael Fallon - visiting SmartestEnergy’s Ipswich base to mark the fifth anniversary of its retail business – that the company is supportive of EMR but has concerns over some of the detail, particularly the supplier obligations proposed under the reforms.
“The obligations which currently look set to fall on suppliers are costly and could stifle competition in the market,” warned Groves of the firm which is the UK’s leading purchaser of energy from the independent sector and a major supplier to industrial and commercial organisations.
Under Electricity Market Reform suppliers will face an increasing number of charges to support both the capacity market and Feed-in Tariff Contract for Difference (CfD) scheme.
Groves said that the proposed mechanism for collecting money from suppliers (the combination of what is known as the Reserve Fund and Levy Rate) to pay for the amount owed to generators with a CfD means suppliers, and in turn customers, could be exposed to a change of costs within year and potentially large liabilities at the end of each year.
“This could prove problematic if the customer has moved away from the supplier or if they have not factored any additional cost into their budgets.”
SmartestEnergy believes that if collection under the Levy Rate in a particular year falls short, then the additional amount required should be included within the rate for the following year rather than causing volatility in charges.
“As individual suppliers have different costs of capital, the obligations could have a greater impact on smaller suppliers at a time when new entrants have a vital role to play in stimulating competition and reducing costs,” he pointed out.
The Energy Minister’s visit to SmartestEnergy came as it continues to expand its retail sales business.
“We were able to highlight the important role that smaller suppliers such as SmartestEnergy can play in helping bringing more competition to the market and in creating new jobs in the sector.”
SmartestEnergy, which is headquartered in London, now supplies electricity to 600 customers, including some of the UK’s largest businesses.