Energy Sector entering a new phase of COVID-19 crisis

Ongoing disruption

With most retail outlets set to reopen, sporting events set to resume, and travel restrictions being lifted the end of the lockdown is within grasp.

However, restrictions on some areas are set to remain in place and energy suppliers are likely going to have to continue to rely on different working practices for some time.

Economic challenges

One side effect of the lockdown has been the huge hit to the economy. Last month the Bank of England forecast that the UK could shrink by a staggering 14% in 2020 as a direct result of the virus and the lockdown measures.

Consequently, many people have or will lose their jobs and for energy suppliers, this is particularly concerning.

Already the government has offered aid to the sector as more and more consumers struggle to pay their energy bills. With the true aftermath of the lockdown yet to reveal itself we could see more and more job losses as businesses struggle to survive. BP, for example, has announced the loss of 10,000 jobs and firms such as SSE laid off over 2000 staff last month.  

Read more: 2,600 SSE Staff to lose their jobs as Ovo announces redundancies

The Price Cap

According to Ofgem, there are no plans currently to alter the current price cap as they claim, ‘it enables customers to benefit from the significant fall in wholesale energy prices in the wake of COVID-19’.

Some energy suppliers have called for the price cap to be adjusted higher to allow them to raise prices and cover their losses because of consumers defaulting on their energy bill payments.

In response, Ofgem has said that it does not have sufficient evidence to justify a price cap rise when it next decides the price cap in October.

“However, if in the future, we see a significant increase in these costs we will take this into account. Overall, if the trend of lower wholesale energy prices continues, we expect households on default tariffs to see a meaningful reduction in prices over the winter as a result of the next update of the cap,” said Ofgem.

Continued support for customers

Knowing that tough times are likely ahead, energy suppliers need to continue to support the most vulnerable of their customers. The Priority service register should be kept up to date and maintained and potentially new consumers will have to be added as the economic impacts of the lockdown continue to be felt.

Ofgem has recently announced support scheme is designed to assist suppliers struggling with their finances if they have no other access to other forms of monetary support and have eased some regulatory requirements to ease some of the burden on businesses.

Energy suppliers need to maintain their standards of customer service and re-establish their business as usual practices as quickly as possible to avoid any disruption to consumers. Some challenges remain however such as the new rules introduced regarding smart meter installations and social distancing.

Suppliers should also be aware that Ofgem will likely begin to re-establish any eased regulations over the coming weeks.

An opportunity to raise standards

With the government easing the lockdown energy supplier employees that were on furloughed will be able to return to work and in turn increase their company’s operational capacity.

Energy suppliers should not rush into re-establishing the way things were prior to the lockdown but instead could use the lessons learned from it to raise standards and perhaps improve how they get things done.

Suppliers that have previously struggled with providing quality customer service, for example, should have used the lockdown to experiment and adapt new methods to improve. 

Is the end of the COVID-19 crisis in sight?

The mass protests seen in cities across the country could see a return of the virus and potentially undo the efforts carried out by us all during the lockdown.

The feared second spike in cases could occur but due to the virus’s incubation period that won’t become clear for at least another few weeks.

If a second spike does occur then there is a high chance that lockdown restrictions could be reimplemented in the worst affected areas, something energy suppliers should prepare for. 

Further Reading

Government to give Energy suppliers temporary relief on increases to CfD charges

Smart Meter Installations resume as lockdown restrictions ease

Ofgem announces £350 million support scheme to help struggling energy suppliers

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For more information on how to start and manage an energy company, get in touch with Dyball Associates today.

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