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StepChange submission to Energy Security and Net Zero Committee inquiry:

Energy bills for domestic customers – February 2024

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We welcomed the Energy Security and Net Zero Committee’s decision to open an inquiry into energy bills for domestic customers, looking at whether the current rules are fair for all. 

We told the Committee that holistic reform of the energy price model is needed to deliver long-term affordability to those at risk of fuel poverty and to provide sufficient protection and assistance to those struggling with energy debts. This includes the implementation of a social tariff in the energy market which protects vulnerable consumers, including those on the lowest incomes.

We also drew the Committee’s attention to outstanding problems in the energy debt pathway for customers struggling to keep up with energy bills. Key problems we continue to see include suppliers failing to identify and take account of vulnerability, suppliers making unaffordable demands for repayment and punitive approaches to enforcement. We set out in our response urgent steps to address these issues. We would especially like to see improvement in the following areas:

  • Assessments of a consumer’s ability to pay should be conducted using a robust budget tool such as the Standard Financial Statement (SFS), or the Common Financial Tool (CFT) in Scotland, to ensure consistency across the sector and with debt advice.
  • Supplier license conditions would benefit from greater prescription to ensure households do not face inappropriate and unfair enforcement methods. Current conditions do not require a specific ‘ability to pay’ affordability assessment and will still allow suppliers to demand an undefined ‘reasonable default repayment rate’ where it has not been possible to establish a bespoke affordable rate. This is not sufficient to safeguard against unaffordable payments being taken from financially vulnerable households.
  • There must be stronger rules around the use of enforcement agents, aligned with new mandatory PPM license conditions and guidance.
  • Communication from firms to consumers facing difficulty must be carefully designed and worded.
  • Effective referrals to advice and support organisations must be improved.
  • Finally, new licence conditions and guidance must be accompanied by a proactive monitoring and enforcement regime that prevents continued failures or misconduct from suppliers. This is essential to ensure higher standards around involuntary PPM installation are effective.

We also reiterated our support for Ofgem considering energy standing charges reform designed to improve outcomes for low-income households disadvantaged by the current set-up, while protecting vulnerable customers with high energy consumption needs.