MOSL is calling on Ofwat to create a clearer pathway to the easing of price protections in its response to Ofwat's Retail Exit Code (REC26) consultation.

As the market operator for the business retail market, MOSL said its response is grounded in an evidence-based approach, advocating for “a gradual and cautious transition” towards greater competition.

Key points from MOSL’s response include:

Establishing a clearer pathway for easing protections: Ofwat should set out transparent benchmarks for customer awareness, engagement, and switching activity to provide clarity on what constitutes sufficient progress and the conditions under which protections may be relaxed.

Considering wider market developments: The REC26 review should reflect recent and ongoing initiatives, including the rollout of smart meters, the introduction of the Business Customer and Retailer Measure of Experience (BR-MeX), reforms to the Market Performance Framework, and updates to the Customer Protection Code of Practice. These initiatives play a critical role in strengthening consumer protections.

Recognising the diversity of customer costs to serve: Ofwat should examine evidence from retailers regarding the costs associated with serving different customer segments and consider whether additional service categories are required in certain circumstances.

Adopting a more agile approach: MOSL recommends that Ofwat explore mechanisms to address specific aspects of the REC within the current three-to-five-year review period. For example, the rollout of smart meters may have a material impact on retailer costs, which are unlikely to be fully understood this early in the current AMP5 2025-30 timeframe.

Simplifying and clarifying protections: Protections should be presented in a format that is more accessible to customers and market participants, while providing a forward-looking perspective on costs, as well as customer and societal needs.

MOSL is also calling for greater clarity regarding the application of protections to multi-site customers, as approaches to Group One price protections currently vary across retailers.

Overall, MOSL says it supports the principles underpinning Ofwat’s REC26 review – but cautions:

“However, we believe that establishing a clearer framework for benchmarking metrics such as customer awareness, engagement, and switching will enable more effective targeting of interventions. This would help ensure competition develops in line with the objectives and actions set out in the Strategic Panel’s Roadmap to a Flourishing Market.”

Strategic Panel questions continued use of ‘no worse off’ principle - "it risks stifling innovation and may no longer work in interests of customers"

The Strategic Panel, the most senior governance body for the Business Retail Market (BRM), has separately published its own response to Ofwat’s Review.

The Panel says its response is underscored by the following key themes:

• Ensure the protections are proportionate to the harms being protected against
• Protections should be forward looking
• A more dynamic approach to advance customer benefits
• A broader strategy is needed to support market evolution
• There is a need to look at other markets
• A more cost reflective approach with a safeguard cap
• The current approach is not the only way to maintain simplicity

Launching the response, the Panel said:

“While the Panel supports maintaining the current form of price protections to avoid unnecessary complexity, it suggests that the method for setting these protections should evolve. The Panel questions the continued use of the ‘no worse off’ principle, as it risks stifling innovation and may no longer work in the interests of customers.

The response encourages Ofwat to clarify whether current protections are proportionate to the harms being addressed, especially given data indicates similar switching rates across customer group thresholds.

The Panel also suggests that caps based on an average cost to serve risk excluding higher-cost customers from competitive offers and may limit retailer engagement and goes on to propose a safeguard cap set at a level that doesn’t disincentivise engagement while still protecting customers.

The response is calling on Ofwat to draw on insights from other regulated sectors, such as energy, to develop a more cost-reflective approach that accounts for drivers like bad debt and payment method.

Click here to download MOSL’s response to the Retail Exit Code consultation (REC26)

Click here to down the Strategic Panel Response