Energy Systems Catapult welcomes the opportunity to respond to this consultation.

Key points:

• We are broadly supportive of Ofgem’s short-term priorities (i.e. to bear down on costs in the standing charge and to move to give consumers more choice in tariffs).
• We agree that simple abolition of standing charges would have undesirable whole system effects (most notably, increasing the incentives for inefficient bypass of the grid).
• However, we remain fundamentally sceptical about the fitness for purpose in the medium term of a strategy based on detailed and prescriptive regulation of the structure of charges through the default price cap.
• We note there is no ‘magic bullet’ for tariff design which will simultaneously satisfy all social and cost-reflectivity objectives.
• We believe that it is crucial to unlock innovation to deliver consumer benefit in the energy transition and that this can be best delivered through a policy and market framework that gives retailers and service suppliers freedom and incentives to make commercial trade offs in this space.
• In relation to affordability/vulnerability objectives we think the direction of travel should be towards considering more explicit outcome-based policies to mandate or incentivise retailers to achieve social policy outcomes relating to energy access / addressing issues of vulnerability, leaving maximum room for innovation in service design.
• Ofgem should look closely at the fairness and cost allocation issues/rationale specifically relating to PPM customers. There seems to be a potential case for some reduction in standing charges recovered from PPM customers, given the more contingent nature of the potential service demand that PPM customers can place on the system.