MOSL has today published its response to Ofwat's consultation on the review of the Retail Exit Code (REC). The REC sets price caps with an aim to protect non-household (NHH) customers who have not switched retailer or renegotiated their contract since the market since opened in 2017, and remain on default tariffs.
Having considered a range of evidence and analysis on the supply side, including a report MOSL commissioned by Economic Insight (EI), MOSL consider the most likely explanation that the market is not currently working is an insufficient profit motive for retailers to compete, as a result of the REC price caps being set too tightly.
MOSL recognises that a loosening of price caps will lead to higher prices for customers in the short term, than would otherwise apply under the current proposals. However, MOSL believe that this will be outweighed by the medium and longer term harm from maintaining price caps at the proposed levels, which are too tight and impede competition.
MOSL supported Ofwat’s broad conclusion that the market is not working for smaller customers in Group One. These customers are not yet benefiting from competition, as evidenced by a range of metrics including minimal savings from switching, low awareness and low levels of engagement.
However, MOSL outlined significant concerns that Ofwat has not sufficiently explored and analysed the full breadth of reasons as to why the market is not working, and why smaller customers in Group One are not benefitting from offers to supply them from rival or new entrant retailers.
MOSL is particularly concerned that the proposals do not help mitigate, and could increase, the risk of customers being stranded should a large regional incumbent retailer fail.
MOSL has called on Ofwat to set out a longer-term strategy around how it will encourage competition for small customers in the market and that this should form an integral part of the revised REC.
The full response can be found here. If you have any questions on it please email
