Citizens Advice response to DESNZ consultation on introducing fixed price certificates into Renewables Obligation
The scheme has significant impacts on domestic and non-domestic consumers. It adds around £75 to a typical dual fuel energy bill - more than any other single policy levy. The scheme design has also contributed to instability in the energy retail market, because obligations are currently paid annually. This means suppliers are free to use the money they raise from consumer bills for the scheme as working capital, while building up large RO liabilities. The RO payment deadline has therefore often acted as a ‘tripwire’ for supplier’s in financial difficulty to to fail, leading to over £200m in mutualised costs which have been added to energy bills.
We think the reforms should prioritise options which:
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Enable more frequent settlement, preferably monthly, in line with best practice in modern schemes like Contracts for Difference. This would significantly reduce the risk of mutualised costs if suppliers fail.
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Reduce billpayer costs by removing the need for headroom and a move to indexation by CPI (in line with Contracts for Difference).
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Future proof the scheme for possible changes in the retail market, by designing it to work simply for a range of supply business models and to better enable options to rebalance levy costs.