The price cap has been a “terrible public policy failure” which has driven up bills for customers, Good Energy chief executive Nigel Pocklington has warned.
Pocklington was speaking with City A.M. following Good Energy’s latest half-year results published this morning, which included a 168 per cent boost in pre-tax profit for the first six months of the year.
After its £32.7m intake, he told City A.M. that the price cap’s continued existence in the retail market exposed the lack of urgency in government’s approach to the energy market, which was not keeping pace with the speed of Ofgem’s reforms.
“We accept the idea of a price cap as part of the furniture in retail energy supply, but it’s a terrible public policy failure, which sounded great, but actually has cost people more money,” the energy boss said.
Pocklington said this was “symptomatic” of inaction from Downing Street which was causing wider problems in the energy sector, including rising bad debt, the lack of renewables-only power pricing, and no plans for support this winter for vulnerable customers.
He added: “Nobody wants to grasp the nettle on retail market reform and whether the price cap works. Nobody wants to grasp the nettle on wholesale market reform at the cost of renewables, and how you make energy cheaper. Nobody wants to go anywhere near a social tariff type concept where you’re using the welfare system rather than energy companies to deal with vulnerability and energy poverty.”
Ofgem has recently unveiled consultations on the prospect of a social tariff, with chief executive Jonathan Brearley openly questioning the role of the price cap in the market.
However, such changes would require legislative action from the government – which writes the rules regulators follow, including the introduction of a price cap in 2019.
This follows the collapse of 30 suppliers during the domestic energy crisis, where suppliers were exposed by restrictions which prevented them passing on high wholesale costs onto customers, alongside insufficient hedging.
The price cap is a matter of contention in the sector, with energy bosses including Utilita chief executive Bill Bullen also calling for its removal, while Octopus Energy boss Greg Jackson considers it vital for protecting customers from ultra-high energy billls.
A Department for Energy Security and Net Zero spokesperson said: “These comments fail to recognise the fact we are actively consulting on the future of the energy market, to ensure households and families can access the full benefits of moving to a smarter, more flexible energy system.
“We recognise the role the price cap has provided in incentivising suppliers to become more efficient and helping the government deliver support to families – last winter we provided nearly £40 billion to cover around half a typical household’s energy bill.
“We will always ensure the energy market is working for consumers to protect them from sky high bills and that households are getting the best deal.”
Good Energy shares rise after bumper earnings
Good Energy is the latest domestic supplier to post a bumper turnaround in profits over the first six months of trading this year.
Its take-home was powered by rising tariffs over the past 12 months and Ofgem’s decision to allow firms to recover costs from the industry crisis.
The company has posted a 168 per cent boost in pre-tax profit for the first six months of trading in 2023, rising year-on-year from £12.2m to £32.7m.
Net earnings rose from £0.3m to £12m over the same period – a whopping forty-fold increase- and overall revenues soared 45.6 per cent from £107.6m to £151.1m – driven by elevated energy prices.
The headline numbers follow larger suppliers such as British Gas, EDF and Eon UK all posting vast earnings in the first half of the year.
Shares are up 11.7 per cent on the FTSE AIM All-Share, with the company also revealing its plans to shift from a supplier business to a wider renewable services firm have gained momentum.
This includes heat pumps, solar panels, and smart technology to track electric vehicle charging points.
Good Energy has also continued its drive to expand the company’s services, snapping up solar panel business Wessex Eco Energy in June earlier this year for £2.5m and launching a new tariff for solar customers.
Meanwhile, electric vehicle service Zapmap has posted a loss of £1.1m, but has expanded its registered user base 52 per cent to 683,000 customers with 80 per cent of all electric vehicle drivers in the UK registered on the platform.
Looking ahead, Good Energy anticipates a one-off loss in the second half of 2023 due to lagging commodity costs and tariff reductions.
New propositions for business customers are also planned for launch in the second half of the year.