Universal Registration Document 2020

1. The Group, its strategy and activities

Competition

The latest data available at the end of October 2020 show that the combined marketshare of small and medium suppliers is now around 19%, compared to 26% at the end of October 2019. The market share amongst small and medium suppliers is expected to show a significant decrease in 2021 as both Octopus and Bulb approach the 3 million total accounts threshold to join OVO as one of the large suppliers.

There were 39 small and medium suppliers at the end of October 2020 (excluding white labels and License Lites), compared to 52 at the end of October 2019. EDF Energy had 4.837 million product accounts at the end of December 2020, a decrease of c.200k since the beginning of the year. EDF Energy’s market share decreased from 9.5% at the end of 2019 to 9.3% at the end of 2020.

Competition in the market is driven by ongoing mergers and advancements in digital technology. In Q1 2020, OVO acquired SSE’s residential supply and services business and moved up 6 places to become the 2nd largest supplier in the domestic market. E.ON’s aim is to migrate Npower’s domestic and SME accounts onto its new licensedKraken platform branded “E.ON Next” by H1 2021.

Octopus continues to offer Kraken as a service to other suppliers in the UK with E.ON/Npower and Good Energy as licensees, as well as internationally to OriginEnergy in Australia. Bulb and Ovo energy have also both expanded international with their respective software platforms.

Regulatory Change
Default Tariff Cap
  • Ofgem introduced a cap on default tariffs for domestic customers on 1 January 2019;
  • The cap level is updated to reflect revised costs every 6 months. At the end of 2020, the separate cap on tariffs for domestic customers with prepayment meters ended, but a cap for PPM customers is being included within the wider default tariff arrangements;
  • In August Ofgem made a recommendation to UK Government that the default tariff cap should remain in place for 2021. In October, the UK Government announced the cap would continue for at least a further 12 months until the end of 2021;
  • Ofgem has confirmed that, from April 2021, the domestic tariff cap will include an allowance for additional bad debt costs incurred by suppliers as a result of Covid-19 impacts.
Smart Metering Policy

GB energy suppliers are required to take “all reasonable steps” (ARS) to install smart meters for their domestic and small business customers before the end of June 2021.

UK Government has confirmed there will be a new obligation on all suppliers to continue installing smart meters for the period July 2021 to June 2025. The UK Government is currently consulting on the annual minimum installation targets all suppliers will have to meet for the first two years; July 2021-June 2022 andJuly 2022-June 2023, the targets will not be covered by ARS. These targets are challenging and there are real risks that suppliers will fail to achieve them, given that smart meters remain optional for customers. EDF and other suppliers are working with UK Government to develop future targets which strike the balance of completing smart meter roll out in a way that maintains both pace, the correct technical standards and a positive customer experience.

EDF Energy remains committed to delivering smart meters to all domestic and small business customers who want to benefit from this new technology. In 2020, EDF Energy has installed a further c.343k smart meters and at the end of 2020, c.38% of EDF Energy customers in scope for the rollout have smart meters. In total, 1.9 million smart meters have been installed to date.

EDF has continued to make progress with our Smart programme rollout with key milestones in 2020, such as:

  • releasing eligibility of 348k customers for smart metering owing to progress with asset procurement and system change;
  • commencing rollout of SMETS2 Pay As You Go in the northern regions of the UK;
  • and progressing enrolment and adoption of SMETS1 meters to the DataCommunications Company. Over 600,000 SMETS1 meters in credit mode have been Enrolled and Adopted and are operating as Smart.

EDF Energy is in consultation with Ofgem and BEIS regarding future targets and continues to have the full support and commitment of the Board of Directors to ensure it fully delivers on its regulatory commitments.

Ofgem Licensing Reforms
  • Ofgem is undertaking a phased review of energy supplier licensing arrangements to ensure appropriate criteria are met by applicants and holders of supply licences, including to minimise risks and impacts of future supplier failures on consumers and remaining suppliers;
  • The proposed reforms include increased regulatory monitoring of all suppliers to ensure effective risk management and more responsible governance and increased accountability measures. A final decision on an initial package of proposals was made at the end of 2020 with implementation date of 22 January 2021;
  • A further consultation on more prescriptive measures to reduce the costs and impacts of supplier exits is planned for early 2021.
Covid-19

To support energy suppliers during Covid-19, Ofgem and UK Government introduced a number of financial measures:

  • a requirement on network companies to allow eligible suppliers to defer up to three months the payment of network charges until March 2021;
  • changes to Contracts for Difference Electricity Supplier Obligations to protect suppliers from 80% of the increase in supplier obligation costs up to £100 million;
  • the introduction of a cap on the recovery of system balancing charges allowing suppliers to defer up to £100 million in charges to be spread over the 2021/22charging period.

UK Government introduced an economy-wide “furlough” scheme to support the salaries of employees, now extended to March 2021 for companies impacted by lockdowns. UK Government also deferred VAT, with payments due from 20 March to 30 June 2020 required by March 2021, interest free.

Domestic Customer Services

In response to the Covid-19 crisis, EDF successfully transitioned its Customer Service resource to home working and prioritised services to vulnerable customers. Field staff supported “Force for Good” initiatives through partnerships with organisations such as Boots UK and Avicenna, completing deliveries to vulnerable customers across over130 locations in the period April to August.

Despite industry wide challenges with customer bill shock, debt and complaints, EDF expects to achieve Citizen Advice score of 4.0 for Q4 and maintain a Trustpilot score of 4.3, which equates to 4.5 stars and a rating of Excellent.

EDF has continued to provide customers with a range of inbound contact channels, while continuing to improve our digital offering. App penetration has increase from 17% to 33% over the course of 2020 and the WhatsApp messaging channel has grown from 9k per week to 29k per week over the same period.