Energy Consumers Commission 2020-2021 workplan: consultation

5. Priorities and Themes of Focus

Initial consultation between December 2019 and March 2020 was carried out and this identified a range of recurring issues for consumers, the most prominent of which are listed below:

• Energy debt
• Issues with Pre-Payment Meters
• Improving outcomes for off-grid heat consumers
• Instances of poor customer service and suppliers' responsiveness
• Restricted meters/tariffs

The above subjects were then streamlined into four themes. These themes are intended to take a whole system focus – addressing these broad issues across the entire energy industry.

• Energy Debt
• Supplier Best Practice and Customer Service
• Improving Outcomes for Vulnerable Consumers
• Engagement with Decarbonisation

A fuller description of each of the themes is included below:

5.1 Energy Debt

Energy costs have clear impacts on consumers and it is imperative that they are set fairly across the energy system, that consumers are able to understand the costs that they are subject to, reduce them where possible, and are given the opportunity to pay for their energy via a range of appropriate payment methods. 

A key concern identified is energy debt. Under the definition set out in the Fuel Poverty Act of Summer 2019, 25% of households in Scotland are in fuel poverty (^[1]). In addition, according to Step Change 25% of adults were showing at least one sign of financial distress (these include unauthorised overdrafts, missed mortgage payments etc.) prior to the COVID-19 situation (^[2]). The scale of these issues means that it is imperative to build on recent work by Ofgem to ensure that ability to pay principles are fully implemented in practice and to consider how to best manage the linkages between debt in the energy sector and other sources of debt. It is also highly likely that the COVID-19 pandemic will result in further increase in debt overall amongst consumers which will have a knock-on impact on debt in the energy sector. It has been highlighted that these knock-on effects may not be apparent until Autumn/Winter 2020 at the earliest.

In the 2025 Consumer Vulnerability Strategy (^[3]), Ofgem discusses a need for more research into the best means of communication with consumers to build understanding of energy debt. We believe this is especially true in relation to Scottish consumers  experiencing or at risk of fuel poverty.

Consumers may also experience increased levels of debt in relation to energy payments outside of the regulated (electricity and gas) energy markets. These consumers do not necessarily experience the same level of protection as those in the regulated markets (although voluntary standards have been adopted in many cases (^[4])) and may not have access to credit from energy suppliers themselves. In these cases consumers may be forced to seek alternate means of paying for energy leading to indirect energy debt.

The ECC will work to improve understanding of the factors impacting consumer energy costs and debt; and push for costs to be fairly and transparently set and collected.

5.2 Supplier Performance and Customer Service

In general, consumer satisfaction in the energy supply market has remained lower than it could be, with average customer satisfaction across the sector at 72% as of February 2020 (^[5]).

These issues sit within a context of limited consumer awareness of both supplier obligations and paths to complaint resolution. Reports of poor supplier service following Supplier of Last Resort (SOLR) events in recent years are particularly concerning, (^[6]) including, in some cases, moves by insolvency agencies, who operate outside of Ofgem's remit, to quickly reclaim debt (^[7]). In May 2020 Ofgem wrote directly to these agencies highlighting a pattern of poor practice in this area and setting out their expectations.

Further information on the issues faced by consumers without access to the gas grid would help to ensure that there are consistent standards. Currently consumers who are not connected to the gas grid either use electric heating, regulated by Ofgem, or a variety of other fuels (oil, gas biomass etc) which are unregulated.

The ECC will push for consistent, high standards for consumers across the energy sector and work to identify and promote best practice.

5.3 Improving Outcomes for Consumers in Vulnerable Circumstances

In the short term, the COVID-19 pandemic may have a significant impact on consumers in vulnerable circumstances. Those in fuel poverty are especially at risk with a substantial proportion using pre-payment meters and at a particular risk of 'self-disconnecting' from their energy supply and/or self-rationing. Looking to the future, we only have limited insight into how the outbreak may impact consumers, especially those in vulnerable circumstances, within the wider energy market. As such, there is a need to gain understanding both of the immediate impacts of COVID-19 and also of the wider changes to the market overall due to the pandemic, and to engage to ensure that vulnerable consumers are properly considered as the energy market reacts to and recovers from the pandemic.

In terms of the wider industry, impacts may include changes to suppliers' communications with consumers, impacts on the supply chain for insulation and energy technology installations, maintenance etc., and impacts on consumers out-with the regulated energy markets.

Beyond this, Scotland has seen comparatively low uptake of Priority Service Registers (PSRs) in comparison with the rest of the UK (^[8]). Given the current situation, these registers have never been more important in ensuring that support is provided to those that need it the most. There is a need to ensure that consumers eligible for support are registered to receive it.

Ensuring that less IT literate consumers retain the same access to resources and communication channels would also be a key concern in an increasingly digitised market.

There may be also impacts on consumers in vulnerable circumstances that we are not yet aware of. The Commission will be responsive to these arising circumstances as required.

The ECC will work towards consumers in vulnerable circumstances being empowered to dynamically engage in a future energy market, and push for recognition that changes to the energy market can and should be inclusive and fair.

5.4 Engagement with Decarbonisation

The shift towards a decarbonised energy system will require detailed consideration of consumer pathways as they are required to utilise developing technologies throughout the energy sector. These include ultra-low emissions vehicles, aggregation technologies, home heating technologies such as heat pumps and, crucially, smart metering and subsequent opportunities for more granular management of home energy usage.

Levels of consumer understanding of, and access to, these technologies vary. For example, charging infrastructure for EVs varies considerably across household types and this can have subsequent knock on impacts on whether consumers can access the tariffs and savings associated with the flexibility market (e.g. consumers may lose out on potential benefits from using the battery for aggregation purposes). Also, access to heating technologies may be limited by local availability of trained installers and maintenance engineers which can negatively impact the viability of affected systems. The same is true of consumers using restricted meters who may struggle to access the benefits brought on by the smart meter transition. Scotland has a higher proportion of consumers using non-Economy 7 restricted meters than the rest of the UK.

There is also a need to build consumer engagement in energy systems more generally as the investment required to drive a transition to net zero will have a significant impact on consumer bills. This will likely be the case until 2045 and further into the future.

The Commission will adopt a proactive approach, identifying prospective areas of development in the energy sector with impacts on consumers and engaging as appropriate. This is particularly relevant in the context of the transition to net zero.

The ECC will push for increased consideration of consumers in the development of a decarbonised energy system and work towards ensuring the benefits of decarbonisation, financial and otherwise, are shared fairly with consumers.

Consultation questions:

3. Are these the correct themes to focus on in our work to improve outcomes for consumers in Scotland?

4. Would you recommend the addition or removal of any themes of focus?

5. Are the relevant aspects of these themes captured in the descriptions above?