Protecting consumers is at the heart of our role. This role is particularly important for us in relation to energy retail markets, where the industries we regulate directly interface with consumers. In May 2014 we published a document setting out our overarching approach and the context in which we work.
This paper details how three separate flagship projects in relation to Retail Energy Market Monitoring (REMM), Consumer Protection Strategy and Review of the Effectiveness of Competition complement each other at a strategic level. In addition to these flagship projects our other work in relation to Energy Supplier Codes of Practice, Power NI supply price control and implementation of the Energy Efficiency Directive will also work together with the flagship projects to ensure a high standard of protection for electricity and gas consumers in Northern Ireland.
Consumer Protection Strategy
In 2009 we completed a Social Action Plan, which helped inform our work over the past number of years. We are now developing a new Consumer Protection Strategy which will replace the Social Action Plan and which will cover all domestic energy and water consumers. Our aim is to develop a strategy which will cover the next five years and which will protect all regulated energy and water consumers. The strategy will have a particular focus on vulnerable consumers who tend to benefit least from competitive markets.
Monitoring of the energy retail market
The annual Energy Retail Report informs all interested parties, including consumers, policy makers and potential new investors, about the current extent and state of Northern Ireland’s gas and electricity retail sectors. It covers domestic and non-domestic consumers.
The Quarterly Transparency Reports are the vehicle to release some of the information collected within the monitoring project. Through these reports, we increase transparency on the retail energy sector to interested parties. Some of the information included refers to active suppliers per market segment, market shares, switching information and prices comparisons.
We are currently working in improving and enlarging the monitoring we have in place through the Retail Energy Market Monitoring (REMM) project. The ultimate objective of REMM is to implement an effective and proportionate enhanced market monitoring framework on the electricity and gas supply sectors in Northern Ireland. This is one of three priority projects which combine to deliver our strategy on consumer protection and retail market regulation, and strike the balance between delivering effective competition and maintaining regulatory protection. The Retail Energy Market Monitoring (REMM) framework will adequately monitor the energy retail markets, identify potential risks, fulfil our duties on licence compliance monitoring, inform policy and protect consumers.
Review of the Effectiveness of Competition
All consumers can benefit from competition, but are also protected by ongoing regulatory action. As competition develops in Northern Ireland it is important that we demonstrate how regulatory action works in this context. Regulatory action must be
transparent, proportionate and developed through appropriate analysis and consultation. Our 2014-15 priority project reviewing competition in energy retail markets and the associated required regulatory framework is designed to meet the challenge of encouraging competition while ensuring that consumers, and in particular vulnerable consumers, continue to be protected in areas where the market fails.
Codes of Practice
Marketing Code of Practice
The implementation of the EU’s Third Package of energy market Directives (IME3) resulted in licence modifications which required the development of a new Marketing Code of Practice. We have issued a Marketing Code of Practice for domestic customers, and one for business customers, which became effective on the 19 June 2014.
The Marketing Code of Practice will protect gas and electricity consumers, in particular the vulnerable ones, from inappropriate marketing practices, ensuring that they can make an informed, un-pressurised decision on whether or not to change their energy supplier. Compliance with the new code is mandatory and a licence requirement for all regulated electricity and gas suppliers in Northern Ireland. All energy suppliers must be compliant with the code and failure to comply will be subject to enforcement action under licence breach procedures.
Code of practice on the efficient use of electricity
These codes require all electricity and gas suppliers to make available to their consumers information and advice about the efficient use of electricity or gas. We have approved interim codes of practice in relation to energy efficiency for all suppliers.
In June 2012, DETI consulted on an Energy Bill for Northern Ireland. In addition, DETI has consulted on the implementation of the 2012 European Energy Efficiency Directive.
These important consultations contain additional proposals in relation to the work that energy suppliers may in the future be required to carry out in relation to energy efficiency. Therefore we have made a commitment to review the energy supplier’s code of practice in relation to energy efficiency once the results of these consultations are implemented.
Electricity Supply Price Control
One of our core functions is to ensure that utility companies who have a monopoly position act efficiently. A company has a monopoly when they control the industry or are the only company to supply a product or service to the market. Before Airtricity entered the domestic electricity market, Power NI (formerly called NIE Energy) was the monopoly (i.e. the only) supplier in Northern Ireland. To ensure a monopoly company acts efficiently, we apply incentive regulation to protect the interests of consumers.
Even though there is competition in the domestic electricity market, we think there is not sufficient competition to allow the market to operate unregulated. Therefore, we continue to price control Power NI to ensure that consumers pay the lowest possible price for their electricity.
We published the price control for 2014-17 in December 2013.
Energy Efficiency Directive (EED)
The 2012 European Energy Efficiency Directive is aimed at ensuring Member States deliver on Europe’s target of a 20% improvement in energy efficiency by 2020 compared to trend. There are several aspects to the Directive including energy transformation, transmission, distribution and supply.
There are two important consultations issued by DETI on the EED. The Utility Regulator will work to implement the EED through working with electricity and gas licence holders. In relation to Retail energy markets aspects of the EED we will carry out further consultation in relation to those aspects of the EED which relate to providing energy consumers with transparent, accurate information, which is sufficient to enable consumers to make informed decisions to reduce their overall energy consumption. Energy efficiency has the potential to both protect consumers by allowing them to reduce their final bills, and improve energy security by reducing the total amount of energy that Northern Ireland needs.