Energy Regulation from 2019

Single Variable Tariff (SVT) Price Cap

The much criticised government-mandated "price cap" for default tariffs (in truth, a price control, not a price cap - see also Energy History 2017-18) came into force towards the end of 2018 but rising oil/gas prices forced Ofgem to announce a 10% increase from early February 2019. The rise was inevitable and experts had always predicted that such increases would be necessary if oil/gas prices rose, but the public and media reaction was savage nonetheless. Here is the Evening Standard's editorial comment:

How do you turn a “Marxist” plan to cap energy bills into a pledge to help people “ripped off by energy companies for far too long”? You can’t, as 11 million unlucky households are finding out today. The energy price cap was a terrible idea when Labour’s Ed Miliband proposed it in 2013. And it was still a terrible idea when the Conservatives stole it four years later. Now everyone can see why: because it doesn’t work. Announcing a cap doesn’t make gas or power any cheaper. It lasted only three months and goes up by 10 per cent today, taking average bills on variable tariffs to £1,254 a year — a total £1.71 billion rise. In August it will change again. That’s not a cap — it’s a flexible price mis-sold to voters. The better way to keep energy bills low is to shop around in a competitive market. It’s no surprise, then, that the regulator, Ofgem, told consumers to do just that when it broke news of the Government’s useless gimmick this morning.

Giles Wilkes subsequently published an entertaining account of how the price cap came to be announced in the teeth of strong opposition from the Chancellor of the Exchequer, the Energy Department and the Energy Regulator.

Competition Casualties, cont'd

Criticism of Ofgem continued in early 2019 as further recent new entrants proved nonviable - and Ofgem's 'safety net' meant that their customers, who had been attracted by impractically low tariffs, were forcibly moved to larger suppliers, who had to, in effect, bale out their previous competitors.

Projecting the energy transition

Martin Cave, Ofgem's relatively new Chair, delivered an interesting speech early in 2019 forecasting amongst other things:

2019 Power Cut

There was an interesting failure at 1651 on 9 August 2019 - interesting, that is, for those not caught up in it.  Probably because of lightning strikes, two generators came off line, removing more than the 1,000MW National Grid reserve and dragging the standard 50Hz AC frequency down to 48.8Hx.  Several relays then opened so as to disconnect around 5% of the network and so protect the integrity of the remaining 95%.  The system was fully restored within 45 minutes.  However ... a lot of trains also had low frequency protection systems and so lost power.  And a significant proportion of these - ironically those with the most recent software - could not be rebooted by the driver and had to await a technician with a laptop.  In some cases this took eight hours - until after midnight.  There were a lot of unhappy passengers ..


Intergen owned a number of power stations and falsely claimed that they would not operate during 2016 winter peak hours of high demand, so forcing National Grid to pay massively inflated prices to get the company to run them.  This increased their profits by £13m, but led to them being fined £37m by Ofgem in early 2020.

Crises 2021-

Prices rose rapidly in 2021, even before the Russian invasion of Ukraine.  Dieter Helm's analysis is here.


Martin Stanley

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