The Energy Minister Charles Hendry has announced that red tape for smaller energy suppliers has been slashed.
Charles Hendry has announced that smaller gas and electricity suppliers will not have to take part in two government programmes in order to encourage competition with the bigger energy providers.
It means that companies with 250,000 customers or less won’t have to take part in the Carbon Emissions Reduction Target (CERT) or the Community Energy Saving Programme (CESP). After a consultation the threshold for customers has been increased from 100,000 to 250,000.
It’s a significant change from the 50,000 limit prior to this announcement. It had been compulsory for small energy suppliers with just 50,000 customers to take part in these two government initiatives. Consequently, these schemes acted as a barrier for small utility companies wanting to enter the gas and electricity market. It also meant there was no incentive for companies to gain more than 50,000 customers.
The CERT means that companies with more than 50,000 customers have to meet certain targets for the promotion of energy efficiency measures for households such as installing cavity wall or loft insulation. Obviously for a small business this can prove expensive.
The CESP also applies to providers with in excess of 50,000 domestic customers and to those generating an average of over 10TWh/year. This scheme means that businesses have to deliver energy saving measures to domestic customers in certain low income areas. Utility companies are set targets by Ofgem based on their share of the energy market.
Changing these customer limits is designed to encourage more competition in the energy market which is dominated by the big six companies including British Gas, E.ON, Scottish Power, EDF and nPower. By increasing competition the government hopes it will mean more competitive domestic and business electricity prices and gas prices at a time when prices are increasing dramatically.
Charles Hendry said “Currently, over 99% of people get their energy from just six big companies. Reducing red tape for smaller suppliers will help them grow and encourage new players into the market. Increased competition can help bring down prices and encourage innovation, benefitting energy consumers”.
He added “It’s vital that we improve energy efficiency without placing disproportionate costs on small suppliers. We have listened to small suppliers, studied the evidence and gone further than our initial proposals, to give competition a bigger boost”.
