Quantum PR's Blog

An energy opportunity

Associate Director, David Massingham

Since the summer the operation of UK energy markets have had a much- increased media and political profile. Across the board, questions have been raised about the ability of current market and institutional arrangements to deliver key policy outcomes in terms of security of supply, affordability and reduced reliance on fossil fuels.

Among the most pointed questions that politicians in both government and opposition have asked in recent weeks are:

• Whether, in a market dominated by just six major players, effective price competition is possible? Some have gone so far as to argue that the most recent round of announcements about energy price increases suggests collusion between the so-called ‘Big Six’
• What are the main drivers of ongoing price increases?  Views on this vary widely. Some, including the ‘Big Six’, argue that increases are driven by structural factors outside companies’ control, including policy decisions relating to such things as levies to promote certain environmental outcomes such as increasing renewable energy generation and energy efficiency. Others – including Ed Miliband – suggest that the companies are simply maximizing profit at the cost of hard-pressed consumers.
• Whether the existing regulators and the measures that they employ are strong enough to control such a complex market. In particular the role of Ofgem is under increasing scrutiny as it is seen to offer little in the way of resistance to upward pressure on prices. This may well be because its own role is confused. On the one hand, providing economic regulation and on the other being responsible for delivery of key environmental and low-carbon outcomes.

The political atmosphere around these issues has become febrile, fuelled by heated exchanges at Prime Minister’s questions, increasingly angry media coverage and pointed questioning of the motives of energy companies by Select Committees.

The issues that are raised are complex and, in one way or another, have been exercising industry and government for many years.  So far, it has to be said, without much urgency or discernable progress. The current heightened tensions over these issues mean that the stakes for all parties have become much greater in the last few months.  There have been major interventions, including:

• Labour’s pledge to freeze prices for 20 months should they return to office in 2015.
• David Cameron’s off-the-cuff announcement of a review to ‘roll back’ green energy taxes.
• Government’s announcement of the introduction of an annual review of competition in the sector.
• Hostile questioning of the major energy suppliers by the Commons Energy Select Committee that has culminated in the likelihood of a full-scale independent competition investigation.

The result of all of this is that the energy sector is going to be under unprecedented media and political scrutiny between now and the general election due in May 2015. It is also highly likely that energy policy will be one of the key battlegrounds in the election. And that means that the political parties will be working rapidly in the coming months to develop new energy policies to differentiate themselves from their rivals and gain some electoral edge.

For companies operating in the sector, whether as developers or operators or suppliers, this means a period of inevitable uncertainty. This can be both a threat (increasing wariness among investors, for example) and an opportunity, as it will allow the nimble and innovative to work within the various policy processes to secure outcomes that give benefits in the marketplace.

The coming months will present numerous opportunities for companies in this sector to highlight the positive contributions that they can make to achieving the triple aims of energy policy in energy security, decarbonisation and affordability. The arenas in which these issues are debated are crowded as interested parties seek to be heard. In these circumstances, making your case effectively through the media, political and policy channels is vital.  It can even be turned to advantage to secure significant commercial benefit.

But effective engagement is not easy. It requires the right messages to be delivered to the right audiences at the right time. With many years’ experience advising clients in this sector, we have the skills, knowledge and networks to enable you to engage in the most efficient and effective ways.

Get in touch now to find out more about how we can help and to discuss any particular issues of concern to you.