How will suppliers be required to support their customers post COVID-19?

On 1 May our latest update to the Energy Supplier Compliance Portal went live and included changes to the compliance landscape seen during February, March and April this year.

A notable feature of the update was the regulatory response to COVID-19, which we will delve into a little deeper in this blog. Additionally, the requirements of the second phase of the Guaranteed Standards (GS) for switching, which became effective on 1 May, are set out within the portal alongside the GS brought into effect this time last year. Other changes are the updated default tariff and prepayment meter price caps and Typical Domestic Consumption Values, all in effect from 1 April.

Ofgem’s initial response to COVID-19 came from CEO, Jonathan Brearley in March in which he confirmed that the regulator would be “pragmatic” in its approach to compliance during COVID-19. In April, this was followed by formal communications to suppliers and network companies outlining a “framework for regulatory flexibility”. In the letter to suppliers, Ofgem set out what it expects suppliers to do in several areas, some of which we consider here.

In terms of billing and payments, Ofgem said that suppliers need to consider customers’ ability to pay and help them to understand the options available to them if they are struggling to pay; this includes any new support put in place by government specifically to help households through this crisis. In the face of reduced customer service resources and increased demand among customers, the regulator also said that suppliers must able to demonstrate they are prioritising critical or urgent customer contacts over all non-essential work.

On 3 April, Ofgem issued a COVID-19 Monitoring Request for Information to suppliers and have asked that they prioritise this. The regulator confirmed in its letter however, that it is pausing some regular reporting requirements and will not request any new or changed requirements at this time unless absolutely necessary. A such, the deadlines for the Q120 reports for complaints, social obligations reporting and those on Guaranteed Standards of Performance has been pushed back to the end of July 2020.

While May saw Phase 2 of the GS for switching come into force, Ofgem provided further details in its letter on meeting the GS, noting exemptions for circumstances beyond suppliers’ control. Ofgem said that exceptional circumstances in this instance include (but are not limited to) suspending certain activities as a direct response to government advice on COVID-19 and staff absences due to illness or an inability of staff to travel to a place of work due to the impacts of COVID-19.

Now data is beginning to emerge on COVID-19 impacts on consumers’ finances, Ofgem research points to the need for longer term support for customers struggling to keep up with their energy payments as a result of the pandemic. The research states that almost half (44%) of consumers expect their financial situation to deteriorate in the next six months, with nearly a quarter (23%) having reported negative impacts to their finances.

Emerging trends from the NEA and data from Citizens Advice also indicate rises in arrears both now and in the near future. Based on a survey undertaken in early April, as a result of COVID-19, 12% of people say they are behind on their rent, a household bill, or a credit payment. Citizens Advice has said that this is equivalent to more than 6mn people behind on paying essential household bills due to COVID-19. A further 13% expect to fall behind on a bill. The survey, undertaken on behalf of Citizens Advice, compared with figures for the period between 2016 and 2018, with 1% of households reporting being in arrears on a household bill. Additionally, Citizens Advice found that the most common bills people are falling behind on or expect to fall behind on are council tax, gas or electricity, and water bills.

Our next update to the Energy Supplier Compliance Portal will take place in August, supplemented by a webinar on key compliance developments in the year to date, while looking ahead to planned changes during the next six months. In addition to Ofgem’s altered approach to compliance during this period, we have seen the pausing and delay of activities in relation to some of Ofgem’s key work programmes. This includes smart metering, Faster Switching and Half-Hourly settlement updates to which we also cover in the Compliance Portal and scheduled webinar.

Through our offerings in supplier compliance – including our Compliance Service and Energy Supplier Compliance Portal – we interpret the regulatory framework to understand specific, enforceable, obligations. We are able to give our opinion on specific compliance queries based on our understanding of the supply licences and other legislation, as well as other Ofgem and government sources, to help suppliers achieve good consumer outcomes and deliver best practice.

For more information or to request a free trial of the Energy Supplier Compliance Portal, please contact e.bill@cornwall-insight.

Related thinking

Regulation and policy

The changing compliance landscape

In recent months, Ofgem has been increasing its engagement with suppliers to ensure compliance with their supply licences and to deliver more resilient business models. This has been evidenced through a number of actions, such as stress testing suppliers and introducing additional reporting requirements, under the scope of the regulator’s...

Energy storage and flexibility

National Grid ESO’s ‘early view’ winter report 2022/23

We have published an alert on National Grid Electricity System Operator's Winter 2022/23 early view report.  The ESO considers that it is important for industry to be provided with a rough understanding of the situation to come, through the early view report. It is operating under the assumption that the peak...

Commercial and market outlook

Two thirds of energy industry professionals think the market needs to be drastically reformed

A survey conducted of over one hundred leading energy market professionals from across the investment and advisory community, by Cornwall Insight, from the attendees of its Financing Net Zero forum, has shown nearly two thirds (63%) of people working in the energy industry1 believe the UK market needs to be...

Home supply and services

Making the switch – how much will really change?

Last week on 1 July, Ofgem confirmed that the designated Go-Live date for the Centralised Switching Service (CSS) would be 00:01AM on 18 July 2022, as was previously anticipated. The most significant impact of this will be the requirement on suppliers to ensure switches are completed within five working days,...

Regulation and policy

Hanging in the balance – Ofgem’s latest proposals on protecting customer credit and RO payments

Ofgem has published a consultation setting out its latest proposal to deal with the risks – and costs – of supplier failure. This forms part of a broader piece of work on increasing the financial resilience of suppliers and curbing the costs passed on to all customers after a supplier...

Energy storage and flexibility

Network charging – what’s been going on and why should I care?

Across Great Britain there are ~810,000km of wires and underground cables that make up our electricity network. Split between the higher voltage, transmission system and the lower voltage distribution system, these lines and cables are responsible for transporting electrons up and down the country to provide consumers with the necessary...

Home supply and services

Tapestry: Ofgem’s new quarterly Default Tariff Cap

This article was extracted from our Energy Spectrum publication published 23 May 2022. Energy Spectrum is a weekly news service which keeps you up-to-date with developments in the market. For the full article please contact Jack Hunt at j.hunt@cornwall-insight.com The announcement by Ofgem of its minded-to decision in respect of...

Home supply and services

What is the Market Stabilisation Charge?

The Market Stabilisation Charge (MSC) requires all domestic suppliers acquiring a customer to make a payment to the supplier that is losing the customer. The charge applies to all switches, so suppliers are not obliged to inform competitors which tariff the consumer switched to or from. It is comprised of...