New rules: towards a stronger financial position for energy suppliers receiving residual allocation
Energy supply in an essential necessity for low-volume users (see also our previous blogs about the rule changes for shutting off the vulnerable part of this group). At the same time, energy supply is a free market in which it is possible that suppliers, just as in every free market, have to deal with financial shortages. To limit these problems, and above all the possible consequences, the Dutch Ministry of Economic Affairs and Climate Policy is planning to amend four decrees that impact the supply security of gas and electricity to low-volume users, namely: 1) the Security of Supply (Electricity Act 1998) Decree, 2) the Security of Supply (Gas Act) Decree, 3) the Electricity Supply to Low-Volume Users (Licence) Decree, and 4) the Gas Supply to Low-Volume Users Decree. For this purpose, it held online consultations in the period prior to 25 December 2017. Companies that supply gas and electricity, as well as national gas and electricity network managers, will particularly be hit by the proposed amendments and they are the most appropriate groups when it comes to formulating an opinion regarding this topic. Although the coming into force is planned for 1 July 2018, the changes will be introduced on 1 October 2018 at the latest. We will explain the outlines of this intended amendment to the rules below.
Reason for the plans
In a situation in which, for various reasons, energy suppliers cannot meet their obligation to supply to low-volume users, with examples including bankruptcy, suspension of payments or even Internet crime leading to administrative problems, a tool is available: the residual allocation. Residual allocation means that the customer base of the ailing supplier will be divided among other energy suppliers, who acquire a group of extra customers as a result. In practice, it appears that current procedures generally provide proper protection for low-volume users: the supply of their energy (gas and electricity) remains guaranteed and they often hardly notice the transition to a new supplier. However, the receiving supplier may encounter problems within the current rules. They do not always receive the correct data of the allocated new customers on time from the original supplier. As a result, they cannot invoice these new customers for the energy supplied until a later date, despite the fact that they incur costs from the first day to purchase energy for their new customers. The residual allocation in its current form may therefore have the consequence that as a result of financial difficulties at one supplier, other suppliers also run into liquidity problems.
Changes: smooth transfer of data and guarantee
In order to address this issue more effectively in future, the Security of Supply (Electricity Act 1998) Decree, the Security of Supply (Gas Act) Decree, the Electricity Supply to Low-Volume Users (Licence) Decree, and the Gas Supply to Low-Volume Users Decree are being amended. In outline, the intended changes are twofold.
Firstly, a specification will be made of the customer data that are essential in order to be able to send a bill and suppliers will therefore be obliged to have such data in their records in a transparent and uniform manner. This will allow the easy (digital) transfer of this data. The details consist of seven data fields: the telephone number, the bank account number, the level and payment frequency of the advance amount, whether or not electricity will be supplied back, the EAN code of the connection and the name of the network manager in question. Moreover, the period within which data can be transferred (often by an administrator or curator) will be extended by one day to 10 working days.
Secondly, the new rules ensure that, if a supplier has demonstrably insufficient credit to finance the purchase of extra energy, a guarantee for the purchase of gas or electricity will be issued by the national network managers. This will apply to the first weeks in which new customers have not yet been invoiced, with a maximum period of two months.
Compliance efforts for energy suppliers
The obligation to record and update the data strictly necessary for invoicing customers was a deliberate choice. For this purpose, energy suppliers will have to make a limited adjustment to their administrative systems, so that the above customer data are actually available for exchange. The efforts required for the companies involved are expected to be very limited. What’s more, some suppliers are already transparently recording and updating the data in question in their administrative systems.
If you need assistance or a second opinion in contributing your view to the online consultations, do not hesitate to contact us.