Citizens Advice published research on 2 July 2026 setting out six policy options for reforming the energy retail market, covering two areas: the Universal Service Obligation (USO) and the price cap1. The report, Stuck in the Sandbox: Unlocking greater innovation in the energy retail market, was published alongside two supporting reports by the consultancies CEPA and Public First1.
The charity said economic modelling showed that all six reform options could reduce retail electricity prices, though their impacts varied considerably, and that the reforms produced different outcomes for sustainable supplier margins and drew varying levels of support from consumers and firms1. It said price protection for default tariffs remains vital to ensure fairness, though there is scope to improve how it is delivered1. It also found that cost savings are the primary driver for consumers when using new products1.
The report states that work on enabling a wider range of energy supply business models has stalled, and that Ofgem's shift towards more innovation-friendly, outcomes-based regulation is progressing slowly1. It adds that the market has become both more resilient and more concentrated over the same period, and that there are emerging risks that the rules for flexibility services and energy supply are incoherent and increase regulatory friction1.
"Recognising the urgent need for more fundamental reform, this research explored 6 policy options across 2 key aspects of the retail market: the Universal Service Obligation (USO) and the price cap."
The report says developments such as Market-wide Half-Hourly Settlement and the continued rollout of smart metering provide important foundations for innovation, but that under current rules their full benefits are unlikely to be realised1. It says progress has been constrained by the absence of a long-term vision for the energy retail market, and that much of the current discourse around innovation fails to reflect the reality for consumers who do not want to engage with the market or feel they cannot1. On flexibility, it says consumers often face constraints or lack sufficient incentives to shift their consumption1.
The report sets out a package of recommendations intended to drive good consumer outcomes, minimise unnecessary market risks and create the conditions for a more innovative market1. The individual recommendations are not set out in the published summary page.
Why it matters for households
The price cap and the Universal Service Obligation are the two mechanisms that most directly shape what a household pays and what it is guaranteed, so proposals to change either touch every bill. The price cap sets a limit on unit rates and standing charges for default tariffs, while the USO underpins obligations around supply. Citizens Advice's finding that all six modelled options could lower retail electricity prices, with widely differing effects, means the design of any reform matters as much as the direction of travel1.
For a home's energy independence, the report's focus on flexibility and low-carbon technologies is the practical part. It says consumers often lack sufficient incentives or face constraints on shifting their consumption, and that the rules for flexibility services and energy supply risk being incoherent1. Market-wide Half-Hourly Settlement and smart metering are described as foundations whose benefits are unlikely to be realised under current rules1. The report also notes that consumers are open to innovation where it is simple and the benefits are clear, with cost savings the main driver1. The regulatory framework behind these arrangements sits with Ofgem and government, and the report says Ofgem's move to outcomes-based regulation is progressing slowly1.
What happens next
No dated next steps are set out in the published summary. The report does not state a timetable for government or Ofgem to respond to the six options, and no consultation or decision date has been reported1.