Written evidence submitted by the Department for Energy Security and Net Zero (WIN0039)

The document sets out how energy markets, and therefore prices, were affected by the war in Ukraine and the global energy crisis as well as the unprecedented government support to consumers through its energy support schemes. It also reflects on lessons learnt from these schemes (Q1, Q2).

Furthermore, it provides details about current and future requirements on energy suppliers where customers are unable to afford their energy bills. This includes ease of contacting a supplier, the assessment of a customer’s ability to pay, the provision of a range of emergency credits, and new protections related to prepayment meters (Q3).

The document also sets out Ofgem’s statutory duty and key priorities, and the department’s view on how this aligns with the focus of Ofgem’s work on consumer protection in the domestic as well as the non-domestic sectors (Q4).

With regards to the functioning of the energy market, Ofgem has introduced measures intended to improve the resilience of energy suppliers. Government, with support from Ofgem, is undertaking a substantial programme of work towards its new vision for the energy retail market, which works better for consumers, is more resilient and investable, and supports the transformation of our energy system (Q5).

Finally, the document provides information about the Ofgem price cap, its legislative framework, and Ofgem’s ongoing duties to protect consumers (Q6).

  1. What role did the UK grid play in the high domestic prices of winter 2022-23? 

High domestic electricity prices seen during winter 2022-23 were driven by increased wholesale electricity prices. These were in turn driven by high global wholesale gas prices.

Historically wholesale costs of gas and electricity have made up around 30-40% of the annual dual fuel bill of a typical GB household. Over winter 2022-23, this rose to over 70%.[1]

In GB, the wholesale electricity price is determined by marginal pricing, meaning the price is determined by the operating cost of the most expensive generator in a given period, otherwise referred to as the marginal plant.

While the UK generated 41.5%[2] of electricity supply from renewables in 2022, the marginal plant is still frequently a gas plant, meaning rises in gas prices feed through to wholesale electricity prices. However, the Contracts for Difference (CfD) funding mechanism for renewable generation is responsive to energy prices and over last winter, when prices were high, it actually paid back money to consumers. This was reflected in a reduction in the amount needed to fund energy support schemes. Moreover, the government introduced the Electricity Generator Levy on exceptional generation receipts from low-carbon electricity generation.  

Through the Review of Electricity Market Arrangements (REMA) Government is considering whether structural changes to wholesale electricity markets could reduce the impact of any future gas price shocks. With more renewables being built, gas will in any case set the price less and less of the time, while the use of the CfD mechanism will ensure consumers are less impacted by periods where gas does set the price.

Gas is a globally traded commodity, and the UK participates in the global gas market. This means that events that affect gas prices globally in turn affect gas prices in the UK. Gas prices in the UK over winter 2022-23 reflected the very tight global market conditions that started just before, and were exacerbated by, the invasion of Ukraine.

Gas traded at about 50 pence per therm (p/therm)[3] in early 2021. Prices then began to rise slowly in the latter half of 2021. The average price in the six months following the Ukraine invasion was 281 p/therm, over five times the price in early 2021. Gas prices were also more volatile. The maximum and minimum prices in early 2022 were 161 and 315 p/therm.[4] The price range was over fourteen times larger than the preceding year.  

The UK did not have a strong reliance on Russian gas, which constituted only four percent of gas supplied to the UK in 2021.[5] Russian gas also now provides much less of the EU’s gas needs than it used to, where it has been replaced by a combination of liquefied natural gas (LNG) imports and demand reduction. However, increased reliance on LNG stretched the global market and increased price volatility over winter 2022-23, although gas prices have subsequently fallen from their peaks.

  1. What more could have been done to prevent price shocks being passed to consumer bills?

 

Government support for domestic and non-domestic consumers

The Government acted swiftly to provide support to UK households and delivered almost £40 billion of energy bills support through different (domestic and non-domestic) schemes from October 2022 to March 2023, an unprecedented pace of intervention. All the schemes were stood up quickly over summer and autumn 2022, including stepping in to provide support in Northern Ireland, in the absence of an Executive.

There were six main domestic energy schemes. 

The Energy Price Guarantee (EPG) helped 29 million households by providing a unit rate discount for all domestic customers on mains gas and electricity from October 2022 (November 2022 in Northern Ireland) until the end of June 2023, at which point the EPG’s support rate exceeded Ofgem’s energy price cap.[6] The EPG remains in place as a safety net until March 2024.

The Energy Bills Support Scheme (EBSS) GB delivered a £400 non-repayable government discount on electricity bills to help 28 million households in Great Britain.[7]  The EBSS Alternative Funding made available a £400 payment to around 900,000 people in Great Britain who do not have a domestic electricity supply and did not receive support automatically through the EBSS.

The Alternative Fuel Payment (AFP) delivered £200 to specific households as an equivalent to EPG, for those who use alternative fuels for heating (i.e. other than mains gas) such as heating oil, liquefied petroleum gas (LPG), coal or biomass. Over 85% of eligible households received the AFP automatically via their electricity supplier during February 2023. The AFP Alternative Fund provided £200 for the small proportion of households which needed to apply for the AFP, for example because they do not have a relationship with an electricity supplier.

Energy policy is devolved in Northen Ireland (NI), however, in the absence of an Executive, UK Government was asked to step in and provide equivalent support to NI households. Due to the widespread use of heating oil, households in NI received a single £600 payment combining EBSS and the AFP, as well as the EPG.

To support non-domestic consumers, government initiated three schemes from October 2022 to the present day.

From October 2022 to March 2023, the Energy Bill Relief Scheme (EBRS) offered a comparable level of support to the Energy Price Guarantee by providing a discount on the wholesale element of gas and electricity bills to ensure that eligible businesses and other non-domestic customers (such as charities and public sector organisations) were protected from excessively high energy bills over the winter period.

From April 2023 to March 2024, the Energy Bill Discount Scheme (EBDS) is available to customers on a non-domestic energy supply contract with a licensed energy supplier. Eligible non-domestic consumers now receive a per unit discount to their energy bills, subject to a maximum discount. The relative discount is applied if wholesale prices are above a certain price threshold. A higher level of support is provided to businesses in sectors identified as being the most energy and trade intensive (ETII) and to domestic consumers on heat networks. Some non-domestic customers may purchase their energy through a license-exempt supplier, in these cases they can apply for support via non-standard EBDS.

The Non-Domestic Alternative Fuel Payment provided non-domestic properties using alternative fuels with £150, reflecting comparable support to the discount given to non-domestic customers benefitting from the Energy Bill Relief Scheme.

Lessons learnt

Earlier this year the Public Accounts Committee investigated several aspects of the design and delivery of the energy support schemes and published its report.[8] In its recently published response[9], the department agrees with all the committee’s recommendations and set out its actions. 

The department is working across the scheme portfolio to ensure lessons are captured and shared for each individual scheme. In addition, a cross-cutting exercise considers wider lessons and informs future approaches to delivery, including how best to support vulnerable and hard to reach households. 

With regards to domestic customers, the Government prioritised reaching as many UK households as quickly as possible, which was inherently complex, with greater challenges associated with certain households. People not covered by domestic electricity supply arrangements or off the gas grid (or both) are harder to reach, and designing and delivering bespoke application-based solutions for them took time.

  1. How should energy companies respond if customers cannot pay their bills and what actions should they not have recourse to?

 

Domestic Customers

Current Ofgem rules require suppliers to make proactive contact to identify customers who have difficulties paying their energy bills and offer a range of options. However, any domestic household that is struggling to pay their energy bills is encouraged to contact their energy supplier to advise of their situation, even if their situation may be temporary. Citizens Advice and Advice Direct Scotland also provide independent energy advice to those struggling with their energy bills.

Ofgem recently consulted on proposals to improve consumer standards, including extended contact hours and a free method of contact for customers in vulnerable situations, tailored advice and support for customers struggling with their bills. The intention is for these changes to be implemented in December 2023.[10]

A customer is considered in arrears if they have not paid a bill for longer than 91 days/13 weeks and do not have a formal arrangement in place with their supplier to repay. Once they have entered into a formal repayment arrangement with their supplier, they are then considered in debt.

To start recovering a debt, suppliers are required to understand a customer’s ability to pay. This includes exploring different payment amounts and methods that may be suitable in the customers circumstances. Energy companies may then look to set appropriate debt repayment plans based on a customer’s ability to pay. Suppliers should also signpost customers to debt advice services and offer advice on energy efficiency measures where appropriate.

Customers may also repay their debts directly from their benefit payments through the Fuel Direct scheme. The scheme can be used to help those in arrears and involves customers having a proportion of their benefits deducted and paid directly towards clearing a debt.

Prepayment meters (PPMs) can be installed for customers in debt/payment difficulty as a method to recover debt and prevent customers falling into further arrears. In some cases, a customer may choose to have a PPM installed to help manage energy use and household budgets. Licence conditions only allow for the involuntary installation of PPMs as a last resort and only where it is safe and reasonably practical to do so.

Following the Times’ investigative report of 1 February 2023 into some suppliers’ practices of forcibly installing PPMs in vulnerable customers’ homes, on the 4 of February 2023 Secretary of State Grant Shapps wrote to suppliers to express that he was horrified at the reports. His letter stipulated his support for Ofgem’s request for suppliers to pause involuntary installations of PPMs and their corresponding market compliance review. He requested a written response from suppliers setting out the steps they intended to take where PPMs had been wrongly installed.

As a result of the action taken by Government and Ofgem, involuntary installations of PPMs have been paused since February 2023. Ofgem published a new PPM Supplier Code of Practice in April[11], covering both physical installations by warrant and remote switching of a smart meter, to improve protections for consumers. Ofgem is aiming to implement the Code of Practice into suppliers’ licence conditions ahead of winter 2023. The Code of Practice includes requirements for suppliers to:
 

 

Suppliers will not be able to restart involuntary PPM installations until the following conditions have been met:

 

In cases where PPM customers find themselves unable to top-up their meter, suppliers are required to provide emergency and friendly hours credit to all PPM customers, whether smart or traditional. Friendly hours credit is provided overnight, at weekends and public holidays to help customers stay on supply when they may not be able to top up through their usual means. Emergency Credit is a fixed amount of credit provided when a customer’s credit runs low or runs out to ensure continuity of supply.

PPM customers who are still unable to top-up their prepayment meters, and therefore no longer in receipt of energy, are considered ‘self-disconnected’ until they top up their meter. Where a supplier identifies that a customer who is in a vulnerable situation has or is self-disconnecting then they must offer them Additional Support Credit where it is in the customers best interests to do so. This is a fixed amount of credit provided to a vulnerable customer to ensure a return to supply.

Ofgem has strict rules in place to prevent customers being disconnected from their supply for the non-payment of debt. As a result, instances of disconnection are incredibly rare. No electricity or gas disconnection was recorded in Q1 2023. During the whole of 2022, there were 19 disconnections for non-payment of debt in electricity and gas (13 for electricity and 6 for gas).[12]

The financial value of debt and arrears pertaining to domestic electricity and gas consumers has risen significantly from £1.09 billion in Q1 2018 to a peak of £2.39 billion in Q3 2022.[13] It is therefore important for the financial resilience of the sector that suppliers have mechanisms through which they can recover and reduce customer debt and arrears. 

Non-domestic customers

The non-domestic sector has over 60 suppliers[14] and encompasses a wide range of customers, including businesses of all sizes, charities and not-for-profit organisations as well as the public sector.

In December 2022, Ofgem published an Open letter: Good practice expectations for non-domestic suppliers on issues surrounding debt management and disconnection of customers.[15] This guidance is non-binding but describes some of the good practice processes that suppliers are expected to follow, at minimum, to best support their customers, as well as legal obligations that suppliers already need to adhere to.

Ofgem has also completed a review into the non-domestic market and is proposing targeted reforms to ensure suppliers across the board raise the bar to deliver better customer support.[16] Their findings did not point to widespread issues with debt and disconnection for businesses.

Some non-domestic customers have experienced particularly high financial pressures in cases where they signed a fixed rate contract when wholesale energy prices were at their peak. Ministers met with Ofgem and energy suppliers in March 2023 and asked for evidence that they are doing all they can to support their customers. Ministers then also wrote to suppliers in May 2023 to stress the importance of good customer service outcomes and for suppliers to reach out to their customers to discuss options as soon as possible. Following this Government action, a number of major suppliers did actively introduce ‘blend and extend’ contracts, that would allow customers to pay a reduced rate over a longer period.  Government will continue to work closely with Ofgem and suppliers to ensure that dialogue is taking place between customers and their suppliers.

There are a number of options a supplier can take if debt begins to accumulate on a non-domestic account, these include:

 

  1. Has Ofgem got its priorities right in addressing customer protection?

 

Domestic customers

Ofgem’s principal objective is to protect the interests of existing and future consumers. It also has a statutory duty to consider the needs of people with disabilities, who are chronically sick, of pensionable age, on low income or living in rural areas and allows consideration of the specific needs of other groups of consumers.

Consumer protection is a key priority in government’s draft Strategy and Policy Statement (SPS) for Energy Policy in Great Britain.[17] The SPS sets out that Ofgem should make decisions in a way which balances the short and long-term interests of consumers, which incentivises the most cost-effective decarbonisation, and consider the impact on all consumers, especially those who are vulnerable.

As customers struggled with high energy bills there has been evidence of poor supplier practices, especially with regards to forced installations of pre-payment meters (PPM) and consumer service standards. Ofgem have taken a number of steps to tighten their regulation of the sector in response. Within this work there has been a focus on vulnerable consumers, which is appropriate given Ofgem’s duties and the particular risks facing those customers.

Following the publication of Citizen’s Advice “Kept in the Dark” report on 11 January 2023[18], in which concerns were raised around PPM practices, the Secretary of State wrote to Ofgem on 22 January 2023 to revisit compliance around PPM rules as a matter of urgency and stated that he expected strong and immediate action where suppliers fell short. The Secretary of State also stated that Ofgem needed to go further in making sure that their investigations understood the experience of consumers. Ofgem subsequently launched both their market compliance review into PPM installations and their call for evidence with Citizens Advice through which consumers could directly provide information on their experience of being moved to a PPM.

A moratorium on involuntary installations was agreed and Ofgem published a Code of Practice to improve protections for customers. Ofgem has set restart conditions for suppliers (see Q3) and consulted on modifications to supplier licence conditions to include the safeguards set out in the code. The latter will allow Ofgem to use its full enforcement powers with regards to those safeguards.

Since Spring 2022, Ofgem has undertaken a series of Market Compliance Reviews to check whether suppliers are adhering to licence conditions and has taken firm compliance action, including fines, where standards are not met. Market Compliance Reviews have looked at a range of issues including the level of customer service and quality of support for households who are having difficulty paying their energy bills.

According to a regular quarterly survey on consumer perceptions of the energy market, published by Ofgem, domestic consumer satisfaction with customer service decreased from 74% in Q4 2018 to 66% in Q4 2022.[19] The number of consumers who reported problems contacting their supplier remained consistently high throughout 2022. Approximately one quarter of customers who contacted or attempted to contact their supplier found it difficult to contact their supplier in Q4 2022.

Ofgem took compliance action against suppliers for poor customer service in June (excessive call waiting times, call abandonment rates) and for non-compliance with mandated Guaranteed Standards of Performance (GSOP) related to final bills after switching suppliers in May 2023. These resulted in large compensation payments.[20]

Ofgem’s recent consultation on consumer standards focused on two priority areas of consumer protection and satisfaction, the ease with which consumers can contact their supplier and tailored advice and support for customers struggling with their bills. It also included a proposal to require suppliers to publish information on their customer service performance to drive further improvements to customer service. Ofgem is aiming to implement these proposals by winter 2023.[21]

Non-domestic customers

In the non-domestic sector, Ofgem has carried out a market review which was published in July and identified key areas for actions and proposed further policy measures.[22] This includes compliance action where suppliers are not following the licence conditions and rules set out by Ofgem, for example cases where suppliers have been overcharging consumers not under contract on deemed rates and have not been following the rules in applying the Energy Bill Relief Scheme.

Furthermore, voluntary changes such as publishing a best practice guide for how suppliers should ask for security deposits, ensuring suppliers are doing all they can for customers on high fixed price contracts, ensuring customers can easily switch contracts between suppliers, and standardisation for change of tenancy requests are also being implemented. In regard to regulatory changes, Ofgem is consulting on improving transparency requirements for energy brokers on commissions to cover all businesses, regardless of size, improving the timely response rate to customer complaints and standards of conduct, and expanding the existing alternative dispute resolution scheme for non-domestic customers with their energy brokers beyond microbusinesses. Taken together, these actions should improve experiences for non-domestic customers.

Overall, it will be important to ensure that Ofgem’s ongoing work and consultations lead to material improvements for domestic and non-domestic consumers on the ground.

  1. How effective is the Government's approach towards supporting the sector and delivering a functioning energy market?

The focus of retail energy market policy has long been on reducing bills and improving the consumer experience, primarily through seeking to increase competition. Meanwhile, Ofgem’s regulatory regime sought to lower barriers to market entry and encourage new suppliers.

From 2010, smaller energy supply companies began to enter the market in greater numbers.  An independent report commissioned by Ofgem and conducted by Oxera has since concluded that Ofgem’s approach to regulation during this period created the opportunity for suppliers to enter the retail market and grow to a considerable scale while committing minimal levels of their own equity capital.[23] By operating unsustainable, short-term business models, such suppliers were able to benefit from any upside, while being able to exit the market at no or minimal cost. The outcome was a domestic retail market that was not sustainable or resilient; when global energy prices rose rapidly from mid-2021, 26 domestic suppliers serving approximately 4 million customers failed, at significant cost to consumers.

Throughout this period, utilising the established and well tested mechanism of Supplier of Last Resort and as well as the Special Administration Regime, government and Ofgem worked together to successfully maintain continuity of supply for customers, protecting credit balances and limiting disruption. The cost to consumers of supplier failures in both domestic and non-domestic markets (26 domestic and three non-domestic suppliers in the period from July 2021 to May 2022) was previously estimated by Ofgem to be approximately £2.7 billion, or around £94 per customer bill[24] spread over a number of years. These figures do not include the cost of the Bulb Energy Special Administration Regime, which is projected to incur a net cost of approximately £0.24 billion[25] to taxpayers, which the government may decide to recover from consumers’ energy bills.

Ofgem has since introduced a range of measures intended to improve the resilience of energy suppliers and reduce the cost to consumers where supplier failures do occur. We will continue to work closely with Ofgem to understand the effect that current and proposed changes have had on the resilience of suppliers, what more may need to be done to ensure that consumers are protected from any excessive costs in the event of future failures, and that the interventions remain proportionate as the market develops. Whilst the risk of supplier failures has receded, we will also keep our tools to respond to supplier failures under review, so that they remain effective as the retail market evolves.

The government has previously committed to taking account of the lessons from the recent energy retail market instability to ensure that the market is resilient, sustainable, and continues to protect consumers as we move to a net zero energy system. In our Future of the energy retail market: call for evidence[26] that ran until January 2022, we invited views on how government policy can best achieve those objectives. The responses we received from stakeholders focused on the need for a stable market with fair and sustainable pricing that is cost reflective and with fewer costly supplier exits, adequate consumer protections for those that need them, and flexible regulation that adjusts to a changing and innovative market and allows for effective competition to provide the best options for consumers. Whilst there was no consensus on how consumers should be protected, the majority of stakeholders saw reform to the energy price cap as a positive step. Some responses highlighted the need for protections for vulnerable consumers.

These themes underpin our new vision for the retail market, as set out in Powering Up Britain[27], for a market that works better for consumers, is more resilient and investable, and supports the transformation of our energy system.

Better for consumers: Ensuring that energy bills remain fair, and we can work towards abundant cheap energy. Energy must be affordable for all consumers, while we need to uphold and improve consumer standards.

More resilient and investable: Better prepared for future wholesale price volatility and better able to shield consumers from the costs of supplier failure, combined with a return to competition and profitability for well-run suppliers offering value for consumers.

Supports wider energy system transformation: Unlock greater innovation within the retail market by tackling regulatory barriers, alongside the delivery of wider system changes such as the smart meter rollout and Market-Wide Half-Hourly Settlement.

Government, with support from Ofgem, has already undertaken a substantial programme of work in line with these principles. Not least by providing unprecedented support for consumers throughout the global energy crisis, including paying nearly half of household bills, saving them £1500 on average, between October 2022 and June 2023, as well as taking decisive steps to stabilise the retail market and increase resilience of suppliers.

We also recognise that there remains more to do to deliver on our wider vision for the retail market. With prices beginning to fall from last winter’s levels, and the market on more stable footing, it is the right time to look ahead to the future and redouble our efforts. That is why we will pursue further targeted reforms that will set us on a path towards the following.

Unlocking competition, investment, and innovation: empowering consumers by opening up more choice, while enabling suppliers to succeed and usher in new business models that take advantage of new technology.

Helping the energy market become a positive force in achieving net zero: rewarding those who make the switch to low carbon technology, reducing system costs for all, while protecting those who need it.

Protecting the most vulnerable and helping tackle fuel poverty: with targeted support with bills that will help those who need it most. Universal approaches were appropriate to respond to soaring energy prices, but it is also appropriate to return to a more targeted approach as prices fall.

Ensuring we have the right consumer protection framework for a more dynamic future market, particularly on issues beyond price protections, such as customer service.

This is reflected in the Towards a more innovative energy retail market: a call for evidence we launched on 24 July 2023[28], focused on the barriers and enablers to innovation in the current retail market, and the changes that could be required to the policy and regulatory framework to ensure we can achieve our objectives in a more diverse and innovative future market.

At the same time, it is crucial to get wider system reforms right. The ongoing transformation of the energy system will substantially alter the landscape of the retail market. By the mid-2020s we expect to see a further expansion of the smart meter rollout, the implementation of Market-Wide Half-Hourly Settlement, new technical standards for energy smart appliances and tariffs through the Smart and Secure Energy Systems programme, as well as the continued growth in intermittent renewable generation, and electrification of heat and transport. We will also make progress on adjusting the relative prices of electricity and gas to better align with their implicit carbon prices. In parallel, we will continue to remove barriers to flexibility through our Smart Systems and Flexibility Plan, while the ongoing Review of Electricity Market Arrangements (REMA) programme will assess whether to make changes to the wholesale electricity market, which could also have implications for the retail market towards the end of the decade and into the 2030s.

Together, these system-wide reforms will help deliver both our net zero and energy security ambitions by unlocking widespread flexibility, reducing the need for network reinforcements, reducing the amount of additional generation required, reducing renewable curtailment, and reducing the carbon intensity of energy usage.

Government believes that when combined with targeted reforms to the retail market, these changes will equip retailers (across both domestic and non-domestic markets) with the tools and incentives they need to bring forward a greater range of products and services, better tailored to the individual needs of their consumers and better aligned with our net zero objectives. Smarter technologies, tariffs, and services will empower consumers to take advantage of the new choices they face in the market and enable them to benefit from adjusting their energy usage to better align with the availability of low-carbon electricity. In a well-designed future market, there will be opportunities for all consumers to benefit from these changes, regardless of their level of engagement, energy needs, or income.

  1. Is the legislative framework on pricing controls suitable for protecting consumers? 

 

Currently the energy price cap is the primary price regulation affecting most consumers. The cap limits the amount energy suppliers can charge for each unit of gas and electricity, as well as the maximum standing charge consumers pay for access to the grid. It only applies to default tariffs and does not cap a household’s overall bill, which depends on how much energy they use. Because the global gas crisis led suppliers to stop offering new fixed term deals, an unprecedented number (approximately 90%) of domestic consumers are now on default tariffs which are covered by the cap. That number is expected to fall as wholesale costs continue to decline and new fixed tariff deals become available.

As the expert independent regulator, Ofgem is responsible for operating the energy price cap and is the sole decision-maker over how it is calculated. The department sets the policy and broader regulatory framework for the gas and electricity sectors in Great Britain. Roles and responsibilities towards the cap are set out in the Domestic Gas and Electricity (Tariff Cap) Act 2018. The Energy Prices Act 2022 made minor amendments to ensure the cap could support the delivery of the Government’s EPG over this last winter.

However, the cap was designed to be a temporary intervention in a more stable market. Ofgem are obligated to ensure the cap allows efficiently run companies to cover the costs of their supply activities. The costs of supplying energy have become considerably more volatile in recent years, creating challenges for Ofgem to operate the cap efficiently. Some suppliers announced record profits for the first half of 2023 after Ofgem had to increase allowances within the cap to enable those companies to recover some of the exceptional costs of supply from the global energy crisis. The profits come after most suppliers making losses, totalling approximately £4 billion over the past four years.

It is vital that we have the right regulations in place to protect households in future. Consumers are increasingly facing new risks and opportunities. The transition to a smarter energy system has the potential to save consumers up to £10 billion per year by 2050 but households could lose out if they cannot find deals that help them make the most of that greater flexibility.[29] Ultimately, reforming price protections will be necessary to ensure consumers feel the full benefits of the evolving energy system. The Government and Ofgem will be working with consumer groups and industry to explore what protections may work best in the future market.

Ofgem has ongoing powers and obligations to protect consumers in addition to the current energy price cap. Ofgem’s principal objective is to protect the interests of existing and future gas and electricity consumers. It also has a statutory duty to consider the needs of people with disabilities, who are chronically sick, of pensionable age, on low income or living in rural areas and also allows consideration of the specific needs of other groups of consumers (see also Q4). For example, the Domestic Gas and Electricity (Tariff Cap) Act 2018 requires Ofgem to continue reviewing whether consumers on default tariffs, especially vulnerable households, are at risk of excessive charging and to intervene to protect them, if necessary.

August 2023

12

 


[1] Based on previous energy price cap levels, a typical household consumes 12,000 KWh of gas and 2,900 KWh of electricity.

[2] Digest of UK Energy Statistics (DUKES) 2023, Chapter 5, p. 1 (available at: https://www.gov.uk/government/statistics/digest-of-uk-energy-statistics-dukes-2023)

[3] Ofgem, Gas Price Forward Delivery Contract- Weekly average (available at: https://www.ofgem.gov.uk/energy-data-and-research/data-portal/wholesale-market-indicatorshttps://www.ofgem.gov.uk/energy-data-and-research/data-portal/wholesale-market-indicators)

[4] Ofgem, Gas Price Forward Delivery Contract- Weekly average (available at: https://www.ofgem.gov.uk/energy-data-and-research/data-portal/wholesale-market-indicators)

[5] Powering Up Britain – Energy Security Plan (2023), p 11 (available at: https://www.gov.uk/government/publications/powering-up-britain)

[6] Also known as the default tariff cap.

[7] While the number of households supported by the EPG includes those in Northern Ireland, the number for EBSS GB does not. In Northern Ireland a different delivery mechanism was used and EBSS and AFP were delivered as a single payment.

[8] PAC report Energy bills support (available at: https://committees.parliament.uk/committee/127/public-accounts-committee/news/195706/energy-bills-support-took-too-long-to-get-to-those-most-in-need/)

[9] Fifty-eighth report: Energy Bills Support (available at: https://www.gov.uk/government/publications/treasury-minutes-august-2023)

[10] Available at: https://www.ofgem.gov.uk/publications/consumer-standards-statutory-consultation

[11] Available at: https://www.ofgem.gov.uk/publications/involuntary-ppm-supplier-code-practice

[12] For further information, cf. Ofgem chart Number of disconnections for non-payment of debt (available at https://www.ofgem.gov.uk/energy-data-and-research/data-portal/all-available-charts)

[13] Ofgem chart “Total financial value of consumer debt and arrears”(available at: https://www.ofgem.gov.uk/energy-data-and-research/data-portal/all-available-charts?keyword=debt&sort=relevance)

[14] As of the end of May 2023.

[15] Available at: https://www.ofgem.gov.uk/publications/open-letter-good-practice-expectations-non-domestic-suppliers-issues-surrounding-debt-management-and-disconnection-customers

[16] Available at: https://www.ofgem.gov.uk/publications/non-domestic-market-review-findings-and-policy-consultation

[17] The consultation, which is now closed, is available at: https://www.gov.uk/government/consultations/strategy-and-policy-statement-for-energy-policy-in-great-britain

[18] Available at: https://www.citizensadvice.org.uk/about-us/our-work/policy/policy-research-topics/energy-policy-research-and-consultation-responses/energy-policy-research/kept-in-the-dark-the-urgent-need-for-action-on-prepayment-meters/

[19] Data available at: https://www.ofgem.gov.uk/publications/consumer-perceptions-energy-market-q4-2022 and https://www.ofgem.gov.uk/publications/consumer-perceptions-energy-market-q4-2018

[20] Available at: https://www.ofgem.gov.uk/publications/ofgems-deep-dive-delivers-ps5m-boost-consumers and https://www.ofgem.gov.uk/publications/three-suppliers-pay-total-ps8-million-relation-guaranteed-standards-performance-final-billing-compensation-failures

[21] Available at: https://www.ofgem.gov.uk/publications/consumer-standards-statutory-consultation

[22] Available at: https://www.ofgem.gov.uk/publications/non-domestic-market-review-findings-and-policy-consultation

[23] Oxera (2023) Review of Ofgem’s regulation of the energy supply market (available at: https://www.ofgem.gov.uk/publications/review-ofgems-regulation-energy-supply-market)

[24] NAO (2022) “The energy supplier market”, p. 4 (available at: https://www.nao.org.uk/reports/the-energy-supplier-market/)

[25] NAO (2023) Investigation into Bulb Energy, p. 4 (available at: https://www.nao.org.uk/reports/investigation-into-bulb-energy/)

[26] Available at: https://www.gov.uk/government/consultations/future-of-the-energy-retail-market-call-for-evidence

[27] Available at: https://www.gov.uk/government/publications/powering-up-britain

[28] Available at: https://www.gov.uk/government/consultations/towards-a-more-innovative-energy-retail-market-a-call-for-evidence

[29] “Transitioning to a net zero energy system: smart systems and flexibility plan 2021” (2021), pp. 10-11 (available at: https://www.gov.uk/government/publications/transitioning-to-a-net-zero-energy-system-smart-systems-and-flexibility-plan-2021)