The implementation of MOD 797 will cause significant changes in the energy sector after a difficult year

The energy market has faced considerable challenges over the last few months, impacting domestic and commercial energy customers alike. Between suppliers going bust, gas shortages and significant price spikes, the market has been rife with chaos and uncertainty, leaving many wondering what the future holds for their energy supply. As such, the implementation of MOD 797 is a welcome development in the ongoing energy saga.

It effectively means that the non-domestic sector will not share the costs of gas supplier failure in the domestic sector, and vice versa. According to calculations by experts in this area, it is set to save the non-domestic energy market more than £100 million in the coming financial year.

How is MOD 797 changing the energy market?

Since September 2021, 24 energy suppliers have failed. And when a supplier fails, a Supplier of Last Resort (SoLR) is usually appointed by Ofgem. This process applies to both the domestic and non-domestic energy sector. A SoLR is designed to recover costs of supply through a Last Resort Supply Payment (LRPR). These are recovered within the Transportation charges.

Although most of the supplier failures of recent months have occurred in the domestic sector, the cost of gas has not been targeted, meaning that the non-domestic market has been assisting in paying for this, despite not being involved in most of the losses. To put it a different way, businesses have been expected to help shoulder the burden.

But MOD 797 aims to change this.

Existing suppliers have been working to address this with the support of many non-domestic suppliers. By working closely with Ofgem, they have been working to make the necessary changes before the rates for the new financial year are set.

Now that MOD 797 has been implemented, the non-domestic energy market is set to save more than £100 million as a result.

Here are what the charges look like both with and without MOD 797 in place:

No change:

• Total SoLR claims: £1.8 billion
• Gas: £0.8 billion
• Power: £1.0 billion
• Domestics: £0.7 billion
• Non-Domestic: £0.1 billion
• Targeted Recovery: £1.0 billion

With MOD 797 implemented:

• Total SoLR claims: £1.8 billion
• Gas: £0.8 billion
• Power: £1.0 billion
• Domestics: £0.8 billion
• Non-Domestic: £0.0 billion
• Targeted Recovery: £1.0 billion

This marks a welcome development for business energy customers, who are continuing to struggle with the sharp increase in wholesale energy prices in the marketplace.

Consultiv Utilities can help you understand your energy in 2022 and beyond

Understanding the energy market, and how it impacts your business, is essential for making the most of your commercial energy usage. But making sense of your business’ energy bills can be difficult, which is why Consultiv Utilities are dedicated to helping your organisation take the necessary steps to save money and make smart changes to the way you use energy.

Our experts are able to break down the various ways your business can take control of your energy, both by seeking out relevant energy contracts and by making changes in-house. We will highlight energy opportunities to you that can also help you save in the long run, keeping up to date with the latest market changes that could impact your organisation.  

We have the knowledge and expertise you need to cut your energy costs down, and keep them low even as the market changes. We will be with you every step of the way to secure manageable, transparent, and greener utilities for your organisation.

Are you ready to improve your energy outlook? Get in touch with the team at Consultiv Utilities today.