Ofgem published its final Consumer Vulnerability Strategy (CVS) in October, setting out how it plans to tackle vulnerability in the energy market. While the CVS covers the time period up until 2025 the regulator gives us an idea of what to expect in the first year of the strategy in its “Immediate Areas for Focus”.
Looking back, we can see that Ofgem was not kidding about the ‘immediate’ part. The regulator has already consulted on its proposals to try and reduce the number of people, and the impact of, self-disconnecting and self-rationing energy. Alongside this there were proposals to introduce the Ability to Pay principles into the licence. These focus particularly on identification of customers who have self-disconnected, but also on monitoring customers who are at risk of self-disconnection or self-rationing. They go on to propose requirements on suppliers to offer emergency and friendly credit, as well as requiring suppliers to work out the most appropriate ways for individual customers to manage payment arrangements and have all the necessary information available to them.
2020 is now here though, and to fulfil the cliché, a new year brings new opportunities for the regulator. Here’s a little flavor of what we might expect from Ofgem’s vulnerability team in the next few months.
Update the consumer archetypes
The regulator uses 12 consumer archetypes as a part of its distribution impact tool to allow for a granular look at the average consumption levels of different groups of consumers. However, having been created in 2012, they could be considered to be a little out of date. Ofgem has already stated that it is working with an external partner to update the archetypes, wanting them to be “effective and used in a standard approach for assessing distributional impact across Ofgem”. Updating them will help reflect the emergence of new data and produce a more representative model of today’s society.
Proposals for the future energy retail market
The price cap will come to an end at the latest by the end of 2023. In a post-price cap world Ofgem needs to be certain that there are sufficient protections in place to support vulnerable customers. BEIS and Ofgem have already consulted on a proposed vision for the future of the retail market and how they can be “flexible and responsive”. We wait with bated breath as to what decision will be made on this, but Ofgem has put its stake in the ground here, saying that it will further consider future protection for vulnerable consumers – although given the regulator’s stance on customer protection this is not especially surprising.
Network companies to adhere to a vulnerability principle
As a part of RIIO-GD2, Ofgem intends to introduce a new, principles-based licence obligation which would require the Gas Distribution Networks (GDNs) to support consumers in vulnerable situations as part of business as usual. Ofgem has said that this it will make GDNs more accountable for the minimum service they provide consumers in vulnerable situations, while providing scope for innovation. In short, Ofgem intends to introduce a Standards of Conduct into the Gas Distribution Licence. This would require GDNs to work with charities and councils as well as ensuring that their actions result in consumers in vulnerable situations being treated fairly, and that the GDNs’ actions result in good outcomes for their consumers in vulnerable situations. The plan, Ofgem has stated, is to develop this licence obligation through its future RIIO-GD2 licence drafting working group.
The CVS identifies that the regulator has clear goals for the next year on how it wants to improve the protections given to vulnerable consumers. We will be discussing the latest developments in consumer protections at our Vulnerability Viewpoint forum later this month. For more information contact Vicky Simonds on v.simonds@cornwall-insight.com.
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