Citizens Advice has published new research on energy tariff options for consumers in vulnerable situations which aims to provide researchers, policy makers and energy market stakeholders with a better understanding of the possible options to ensure that disengaged vulnerable consumers are not penalised by higher tariffs. The research was carried out by the Centre for Sustainable Energy. Read more here.
Previous analysis by Ofgem indicates that poorer consumers could be losing out more than other disadvantaged social groups by not switching energy supplier – the number of poorer ‘sticky’ customers (those who are inactive in the energy market) is 10% higher than average amongst these groups. Based on average savings, consumers on non-fixed tariffs could have saved between £158 and £234 a year (2012-2014) had they switched. So Citizens Advice commissioned this research to investigate options to ensure that vulnerable sticky consumers have access to affordable energy.
Dr Toby Bridgeman, researcher at CSE, led the study. He said: “The research shows that there are several straightforward options that could be introduced to significantly reduce the fuel bills of millions of vulnerable consumers who are currently disadvantaged by the energy market, paying over the odds for their fuel. It would be fantastic if the investigation into the energy market being conducted by the Competition and Markets Authority were to recognise and support some of the recommendations in this report.”
Ofgem is reviewing its work on priority services.
Consultation closes 22nd September 2014. Read more here.
Gas and electricity are essential services. Providing extra services to people who need them to access the market and stay safe remain critically important. This consultation seeks views on proposals that require suppliers, electricity distribution network operators and gas distribution networks to:
•provide additional non-financial services to energy consumers who are more likely than a typical consumer to experience problems with communication, safety and supply;
•take reasonable steps to identify people who would benefit from these services;
•share consumer information with each other and other utility companies, using vulnerability indicators agreed between them;
•raise awareness of services, including developing a single cross-industry brand; and
•conduct annual independent audits of their performance and publish findings yearly
Ofgem has analysed differences in price between different payment methods used by consumers following an information request to suppliers in February 2014. It has found that the gap between prepayment and direct debit has narrowed since 2009. Read more here.
Ofgem rules allow suppliers to charge different prices for different payment methods, but only if the amount reflects the cost of providing those accounts. Some larger suppliers do spread some of the costs of prepayment customers among the whole of their customer base. This is consistent with regulations and guidance, which allow for differences. These result in reduced price differences for vulnerable customers, who often do not have the option of alternative payment methods. Suppliers can also charge the same price regardless of payment method, so they can spread the costs they incur across all customers. However, the majority of consumers pay by direct debit (including half of all fuel-poor households) so any change would mean these consumers would pay more.
Customers who use prepayment meters are now charged around £80 a year more on average compared with direct debit customers for dual fuel. This is a significant fall as the difference was almost £140 in 2009. Ofgem is satisfied that across the market the price on different payment methods reflects the varying costs suppliers face in providing them. The price difference for quarterly payment compared to direct debit has remained at around £80 since 2009.
Following an investigation E.ON has agreed to pay £12m to vulnerable customers, after Ofgem found it had broken energy sales rules. E.ON has also committed to compensating any customer that it missold to, including automatic payments to some vulnerable customers.
Read more from Ofgem here.
The agreed redress package reflects the harm caused by E.ON’s extensive poor sales practices carried out between June 2010 and December 2013.
As part of this package E.ON has agreed to:
•Pay around £35 to 333,000 of their customers who are normally recipients of the Warm Home Discount. This redress package will benefit pensioners, disabled and low income families
•Additionally, make automatic payments to some vulnerable customers who may have been affected by E.ON’s poor sales practices
•Set up a dedicated hotline 0800 0568 497 and compensate all consumers that it missold to
•Write to around 465,000 customers it has identified through its redress work, informing them of how to get in touch to find out whether they were missold to.
As part of the Smarter Markets Programme, Ofgem commissioned the Centre for Sustainable Energy (CSE) to undertake analysis of domestic electricity use patterns and to model the potential distributional impacts of time of use (ToU) tariffs (energy tariffs with different prices at different times).
Ofgem has published CSEs report – see here for more. The tariff modelling undertaken by CSE demonstrates the potential impacts of a ToU tariff on different consumers’ bills. It shows that the types of customers that benefit from ToU tariffs will depend on their current usage as well as how they respond and the types of ToU tariffs on offer.
The publication of this research represents a first step in seeking to understand how ToU tariffs may impact on different customers. Ofgem envisage undertaking further distributional analysis as they make progress towards specific policy decisions as part of the individual projects under the Smarter Markets Programme.
Today DECC published the consultation document on the future of the Energy Company Obligation (ECO). The consultation will run from 5th March to the 16th April.
The majority of these proposals were highlighted as part of Government’s announcement on 2 December 2013. As set out in the December announcement we are proposing these changes to reduce pressures on consumer bills and ensure ECO provides value for money for energy consumers; while continuing to help tackle fuel poverty, support the development of sustainable energy efficiency supply chain and improve the energy efficiency of our housing stock.
While it is clearly right that we look to ensure government policies do not unreasonably impact on consumer bills, we also recognise the impact of these proposals on the energy efficiency market. In particular we recognise that the uncertainty created by the proposed changes has had an effect on delivery on the ground and that consequently the supply chain has seen a contraction in demand.
This consultation is a key opportunity to make sure we implement these changes as effectively as possible, taking into account industry needs and the experience of ECO delivery over the last year.
Consultation closes 16th April 2014.
Read more here.
Low levels of consumer switching characterise many essential services markets (think current accounts or energy suppliers) and mean that competition alone isn’t sufficient to drive improvements. Two new reports from Consumer Futures have tackled this issue head on, introducing the concept of a new form of intermediary.
Next Generation Intermediaries (NGIs) are services that enable consumers to get better outcomes from complex markets by doing very little themselves – effectively outsourcing engagement to a new kind of intermediary service that works on their behalf. They would empower any consumer who lacks the time or inclination to trawl around for a better energy, financial services, or mobile phone package to instruct the intermediary find the offer that best meets the consumer’s declared criteria, and then to instigate and oversee the switch for them.
Let’s call it ‘do it for me’. It envisages a world where any consumer who lacks the time or inclination to trawl around for a better energy, financial services, or mobile phone package can instruct a new kind of intermediary service to ‘do it for me’. What’s more, once that service identifies the offer that best meets a consumer’s declared criteria, the consumer can again say ‘do it for me’ and have the service instigate and oversee the switch to the provider of that offer. And the consumer can then keep saying ‘do it for me’ in relation to related services that require decision support.
This paper provides an overview of the Next Generation Intermediary (NGI) concept – outlining the potential that NGI type services offer and the qualities that set them apart from established intermediary services. It provides an overview of how NGIs would work in practice, the technological trends that make this kind of approach possible now, and some thoughts on who might come to offer NGI services.
As of 2nd Jan Ofgem has banned suppliers from offering complex tariffs. The reforms also mean that once a consumer has decided how they want to pay for energy they will have just four core tariffs to choose from for gas and four for electricity, from each supplier. Read more from Ofgem here.
The changes are part of Ofgem’s reforms for a simpler, clearer, fairer energy market and Ofgem believe that together these changes will make it far easier for consumers to compare deals and find the best tariff for them. From April 2014 a range of reforms are also coming into force to give consumers much clearer information on energy. For example, suppliers will have to tell consumers regularly in writing which of their tariffs is cheapest for them on bills, annual statements and other communications.
Citizens Advice expressed concern that energy companies should not use this as an opportunity to get rid of their cheaper deals – see more here. They will be helping people to cut down on their energy bills through Big Energy Saving Week which runs 27-31 January 2014. The campaign will help consumers to find out about any extra help available from their energy firm.
Consumer Futures pointed out that it would be “naïve” to think this alone will sort out the problems in the energy market, and called for “A
fundamental competition review of the energy market that questions whether its
very structure fails consumers”.
In November National Energy Action published an action guide aimed to assist community groups, local authority officers, advice workers, MPs, and anyone who may come into contact with those struggling to heat their homes affordably.
You can find it here.