Written evidence submitted by Data Communications Company (WIN0036)
2. What more could have been done to prevent price shocks being passed to consumer bills?
The Government implemented various rebates and payment schemes including the Energy Price Guarantee (EPG), the Energy Bills Support Scheme (EBSS) and council tax rebate to protect consumers from the impact of energy price shocks.
These measures taken together are worth £94 billion, averaging over £3,300 of cost-of-living help for every household in the country. While this has been one of the largest support packages to help consumers, we believe, better targeting of these schemes may have enabled greater efficiency and allowed allocation to consumers most in need.
The EBSS launched in September 2022 delivered more than £11.5 billion of support, including £650 million claimed by prepayment meter users, many of whom are low-income households. The DCC played an important role in helping to ensure those with smart meters received credit. This has provided a precedent for future support schemes to be delivered directly to the meter.
However, by the end of the scheme, nearly £130 million remained unclaimed by households with traditional (non-smart) prepayment meters. The Work and Pensions Select Committee also raised concerns through an inquiry on the design and delivery of these packages, believing they may not have provided/ provide sufficient support for all low-income families who need it.
Identification of fuel poor and or vulnerable households has been a significant challenge for the implementation and delivery of government schemes – including those in operation for many years now, such as the Energy Company Obligation (ECO) and Warm Home Discount (WHD) scheme. In its response to the report “Better use of data and advanced statistics/machine learning in delivering benefits to the fuel poor”, the Committee on Fuel Poverty noted that fuel poverty Statistics from Department for Business, Energy & Industrial Strategy (erstwhile DESNZ) showed that only 47% of fuel poor households are in receipt of benefits and, therefore, out of a total spend of circa £2.5 billion per year cost for the ECO, Winter Fuel Payment and WHD schemes, only about 15% of benefits are received by fuel poor households.
Better use of data can help to overcome this challenge and its use being championed by many parts of industry, including:
The Government’s desire and drive for better data use is also evident from the impending Data Protection and Digital Information Bill. The Bill sets changes to the wider UK General Data Protection Regulation (GDPR) regime in response to the “Data, A New Direction” consultation. In addition, the ongoing work of the Department and Ofgem on possible updates to data best practice and the Smart Meter Energy Data Repository (SEDR) programme show that the wider availability of smart meter data is currently being seriously considered.
4. Has Ofgem got its priorities right in addressing customer protection?
Ofgem’s principal objective is to protect the interests of existing and future consumers. The development of the Consumer Vulnerability Strategy (2020-25) and introduction of protections to help reduce the number of prepayment customers who go without energy or “self-disconnect” (October 2020) by Ofgem show that it has been actively working towards supporting vulnerable consumers. There have also been improvements in the PSR services. The consumers need to sign up once and the request is updated with the energy supplier as well as the regional network companies including electricity, gas and water. After successful trials earlier, electricity companies are now sharing PSR information with water companies (wherever possible) since March 2023.
Ofgem’s ‘Market Compliance Reviews’ in April 2022 sought to ensure suppliers are fulfilling the licence conditions they are required to operate. These reviews have provided some very valuable insights. Data for these reviews has been self-reported by suppliers with some information from other sources such as the Ombudsman Services, Citizens Advice and other consumer bodies. The potential insights that can be drawn from the smart meter system data on energy supplier reporting and energy engagement can help Ofgem further to monitor the market and drive efficiency for industry through reduction of duplicate reporting.
Ofgem is also focussed on better use of data for identification of vulnerable and improving overall outcomes for the consumers. While there has been progress on various fronts, we believe that there is scope to enhance and improve the implementation of the protections, better monitor the degree to which they are being deployed and extend greater and more efficient support to the vulnerable households. As included in our response to previous questions, smart meter system data (along with data from other sources) can provide insights that can help in not only understanding consumer needs better but can enable better targeting and direct support.
In parallel, demand for more holistic and transformative solutions such as the introduction of a social tariff is growing. 95 Charities and non-profit organisations across the UK have joined together to call for more targeted support in the form of a social tariff for the energy market to help the households most in need. This might take the form of lower energy charge (below the tariff price cap) or/and reduced standing charge and potentially fixed for a longer duration of time. We recognise that this type of intervention would require significant policy development, regulatory change, and industry activity. From smart metering perspective, Ofgem/Government could benefit from the smart meter data to define eligibility (broader than mean-tested benefits). Further, the remote tariff change capability and the centralised switching service could enact remote transfers on specific (social) tariff and on to select suppliers.
We are also supportive of proposals within the Strategy and Policy Statement consultation (published on May 10, 2023) which includes Consumer Protection as a priority area and emphasises that Ofgem must use all possible levers to deliver an energy system that works better for consumers.
We also believe there is potential for smart metering system data to support greater system coordination and regulatory monitoring of supplier performance. Smart meter system data consists of the information about all the messages sent across the connected devices. Currently, nearly 1.6 billion data transactions are generated every month across the Great Britain. The data provides information on remote transfers to prepay, (volumes and frequency by supplier) and could be used to monitor adherence to the code.
The system data provides other data such as information on the length of time for which a household remains without support or self-disconnects. This can help Ofgem to assess the degree to which the energy suppliers are meeting obligations, demonstrating robust operational capability and providing timely intervention for households in financial difficulty.
5. How effective is the Government's approach towards supporting the sector and delivering a functioning energy market?
There has been a significant volume of policy reforms targeted at the energy sector including the Review of Electricity Market Reforms, the setting of Strategy and Policy Statement for Energy Policy, various sector specific strategies including hydrogen, biomass, distributed flexibility, data reforms, etc. In this context, direct government initiatives to alleviate pressures on the sector (and in turn on end consumer) have been welcomed - the implementation of EBSS and EPG schemes, council tax rebates, the ending of the ‘prepayment premium’.
From the DCC’s perspective, we see further opportunities to ensure affordability and fairness for consumers. And to enable that, it requires:
- Faster regulatory action: DCC has been advocating the use of smart meter system data (potentially combined with data from other sources) to address some of the big challenges facing the UK, including addressing fuel poverty. We are confident that greater transparency of, and easier access to, smart meter data can unleash the transformative potential of the system. DCC published its Data for Good vision in March 2021 and also participated in a government funded innovation project to assess how smart meter system data at an aggregated level, when combined with other data sets, can help to identify households in or at a risk of fuel poverty. We have engaged closely with Ofgem to ensure permitted purpose consent to share smart meter system data with a further 10 organisations to support fuel poverty research and interventions. We welcome Government and Ofgem’s intent to collaborate to identify and remove regulatory barriers in the current framework and request for greater regulatory flexibility for trialling and testing new propositions related to smart metering and smart meter data access.
- Greater pan-industry and cross-sectoral collaboration: There has been evidence that interactions between various sectors and organisations such as housing, health, local government, charities, etc. could be highly beneficial in delivering better outcomes for consumers. A recent report commissioned by Smart Energy GB investigated some of the main ways smart meters can support healthcare including, monitoring health conditions, assessing population health and self-monitoring. Similarly, energy utilities could benefit with information from NHS or other charities in identifying the vulnerable households and provide targeted support. It also reduces the pockets of duplication and provides opportunity to build on existing and ongoing initiatives.
- Better alignment of strategic outcomes: It is important that the key stakeholders in the sector (Ofgem, Government, FSO and other future entities, etc.) work towards the same strategic outcomes. To this end, the Strategy and Policy Statement is welcomed but the sector needs more detailed and time bound plans.
- Greater consumer awareness: While there are a lot of initiatives ongoing and in planning, there is a gap in the awareness in the consumer group of the support available and the benefits of energy systems transition. To put in context, only 47% of fuel poor households are in receipt of benefits under the Energy Company Obligation (ECO), Winter Fuel Payment and Warm Home Discount schemes. Similarly, whilst an estimated 4.3 million households are estimated to be eligible for a social tariff for broadband, the current rate of sign up is just 220k (5.1%).
 Spring Budget 2023 speech - GOV.UK (www.gov.uk)
 Cost of living support payments - Committees - UK Parliament
 CFP's recommendations better use of data to support fuel poor 29 May 2020 (publishing.service.gov.uk)
 Good-Practice-Guide-for-Smart-PPM-Customers.pdf (energy-uk.org.uk)
 Layout 1 (ukrn.org.uk)
 Consumer Vulnerability Strategy 2025 | Ofgem
 Better use of data and AI in delivering benefits to the fuel poor: research report and CFP’s recommendations - GOV.UK (www.gov.uk)
 Smart Metering Data Dashboard .pdf (citizensadvice.org.uk)
 Data Protection and Digital Information (No. 2) Bill - Parliamentary Bills - UK Parliament
 Data: a new direction - government response to consultation - GOV.UK (www.gov.uk)
 Consumer Vulnerability Strategy 2025 | Ofgem
 Self-disconnection and self-rationing: decision | Ofgem
 Accelerating the energy revolution with smart meter data | Smart DCC
 urbantide-uzero-summary-report.pdf (smartdcc.co.uk)
 How smart meters could help improve healthcare | Smart Energy GB