Smaller energy suppliers to benefit from cut in red tape

UK Energy Minister Charles Hendry announced this week that smaller gas and electricity suppliers will benefit from a cut in red tape next year.

Firms with 250,000 customers or fewer will not have to take part in two government programmes — the Carbon Emissions Reduction Target (CERT) and the Community Energy Saving Programme (CESP).

Previously, suppliers with as few as 50,000 customers were obliged to participate. But the government says that participating in these schemes placed a disproportionate burden on small suppliers, acting as a barrier to market entry and reducing incentives to grow.

Hendry said: ’Currently, more than 99 per cent of people get their energy from just six big companies. Reducing red tape for smaller suppliers will help them to grow and encourage new players into the market. Increased competition can help bring down prices and encourage innovation, benefiting energy consumers.’

The CERT is an obligation that is currently placed on suppliers with more than 50,000 domestic customers who are are required to promote energy-efficiency measures to households — for example by establishing schemes to encourage (usually with subsidy) the installation of loft or cavity-wall insulation.

The CESP currently applies to suppliers with more than 50,000 domestic customers and also to generators producing more than 10TWh a year on average. These businesses are required to deliver energy-saving measures to domestic consumers in specified low-income areas. Ofgem sets them targets based on their market share, approves proposals, monitors compliance and enforces CESP.

Both the CERT and CESP schemes will run until the end of 2012.